Mariam Isa
9 January 2009
Johannesburg — SA's gold and foreign exchange reserves rose 2,7% last month, boosted mainly by the effect of higher gold prices and weakness in the dollar, official data showed yesterday.
Gross reserves rose by $883bn, or 2,7%, to $34,1bn after edging up 0,9% in November, following the steepest plunge in decades during October. Net reserves, which exclude foreign loans and are also known as SA's international liquidity position, climbed about the same amount to $33,5bn, the Reserve Bank said.
Analysts said global market volatility would force the Reserve Bank to remain cautious as it continues to build its arsenal of reserves, which still lag behind those of many other emerging markets.
"Uncertainty and volatility in global financial markets have continued to inhibit the Reserve Bank's natural tendency to accumulate reserves," said Nedbank economist Isaac Matshego. "Reserves will probably remain under pressure over the next few months."
SA's reserves have climbed about 30% in the past couple of years, in a trend that supports SA's ability to pay debt and helps shield the economy from global shocks. But they are low compared with other emerging markets such as Turkey, with $70bn, and Nigeria, with $62bn.
The Bank's pace of reserve accumulation slowed sharply last year, as the global financial crisis halted capital inflows to emerging markets and forced the rand to depreciate against major currencies, clocking up a slide of 28% against the dollar.
The Bank has repeatedly said that though it will continue to build reserves, it will not buy foreign exchange in a manner likely to affect the value of the rand, which has already slipped 1,3% against the dollar this year.
"Looking ahead, given the continued volatility in the rand versus the dollar and softer trading levels, we expect the Bank to remain on the sidelines with its accumulation activities," said Absa Capital economist Monale Ratsoma.
"Continuing volatility in the gold price, the euro versus the dollar, and limited capital inflows suggest that revaluation adjustments will continue to be the main drivers behind movements in the level of reserves."
Last month, the value of the Bank's gold reserves surged 7,2% from November, while foreign exchange reserves nudged up 2,2%.
According to Nedbank, foreign investors sold R10,8bn of local assets last month compared with net purchases of R924m in November.
Over the whole of last year, there was a net portfolio outflow of R95,2bn, which compares with a net inflow of R80,2bn in 2007.
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