The soaring gold price has added nearly $7bn to the value of SA’s gold and foreign exchange reserves over the past five years, with the gold component more than doubling in value since 2015 to make up $13.3bn of SA’s total $68.1bn in foreign reserves, the Reserve Bank says.
This is despite the fact that the volume of gold hasn’t changed materially.
But the largest contributor to the growth in the reserves over the past decade has been the “safe assets”, such as highly rated bonds held in foreign currencies, which has expanded by $13bn since 2015, including reinvested earnings on the existing reserves as well as purchases of foreign currency assets.
In its latest quarterly bulletin, released on Thursday morning, the Bank included a box specifically on the growth in the reserves and where it came from.
This is particularly topical at a time when the market is closely watching the reserves to see whether there is potential for the Treasury to tap into even more of the unrealised profits on the reserves than agreed in February 2024.
The Treasury and the Bank agreed then to transfer R150bn to the government over three years to help reduce its borrowing requirement, with a further R100bn transferred to the Bank to bolster its capital.
The agreement on the gold & foreign exchange contingency reserve account (GFECRA) allows for annual transfers if further profits build up on the account, as long as the Bank’s own balance sheet has adequate buffers to protect SA against currency and gold price volatility.
Market players expect the gold price gains could allow for at least another R25bn to be transferred, which could be announced in October’s medium-term budget. The Treasury has said it would look at whether a further transfer from the GFECRA was feasible once the Bank had published its annual financial statements. (The Bank is due to publish these on June 30.)
In terms of last year’s agreement, R100bn was transferred to the Treasury in fiscal 2024/25 to reduce the government’s borrowing requirement, with two further tranches of R25bn each in fiscal 2025/26 and 2025/27.
The Quarterly Bulletin also reported that net capital flows into SA switched from an outflow of R9.5bn in the fourth quarter of 2024 to an inflow of R36.9bn in the first quarter of this year, thanks to inflows of foreign direct investment as well as of reserve assets.
Portfolio investment and financial derivatives recorded outflows in the first quarter.
The inflows, on the financial account of SA’s balance of payments, represented 2% of GDP in the first quarter, compared to outflows of 0.5% in the fourth quarter, and along with a positive balance on the current (trade and services) account of the balance of payments that would have helped to strengthen the rand exchange rate.
While Stats SA is responsible for the national accounts, the bulletin offers more detail ontrends in consumption and investment and the macroeconomy more generally, as well as being the official source of information on SA’s balance of payments.
The latest bulletin reports that SA’s national savings rate increased to 13.4% in the first quarter of 2025, from 12.8% in the fourth quarter of 2024, with corporate business enterprises increasing their savings rate, while households were unchanged and the government deteriorated.
As a result of the higher national savings rate, the share of SA’s investment spending financed by foreign capital decreased from 3.9% in the fourth quarter to 3.4% in the first quarter of this year.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.