Reserve Bank posts R1.58bn profit

Johannesburg  - Despite a challenging global economic climate and slowing domestic growth, the South African Reserve Bank (Sarb) reported a profitable financial year.

Delivering an address to shareholders at the reserve bank’s Annual General Meeting (AGM) on Friday, governor Lesetja Kganyago said that the group reported a R1.58bn profit, compared to a profit of R0.63bn in the previous year. After tax profit was reported at R1.51bn, up from R0.34bn in 2015.

“The improved financial position of the bank is mainly due to the increase in accommodation to banks and unrealised profits due to declining global bond yields and the depreciation of the rand against major currencies,” Kganyago stated.

Read: SA will avoid recession this year - Sarb

The depreciation increased the rand value of the interest earned from investing the country’s foreign-exchange reserves, he explained. Operating costs declined due to the reduced banknote order. This lowered the cost of new currency. The decline was partly offset by higher staff costs.

“We will continue to implement strict internal financial controls to ensure economy and efficiency of the bank’s operations.”   

Growth outlook

The spillover effects of Brexit are still unclear and uncertainty will continue until disengagement negotiations are concluded, explained Kganyago. This has implications for growth forecasts which were revised down due to poorer consumer and business confidence.

The IMF downgraded sub-Saharan growth for 2016 by 1.4% to 1.6%.  This follows previous years where growth rates averaged around 5%. “The region has become a major export destination for South African manufactured goods, and a growth slowdown could impact negatively on these exports,” stated Kganyago.

Read also: SA must grow 1% every quarter in 2016 to avoid recession - Sarb

Slower global growth continued to impact negatively on commodity prices, complicating the outlook for commodity-producing emerging markets, he explained. However, the economy has responded to renewed stimulus measures which helped to stabilise commodity prices. 

Sarb recently announced that its projections for growth in 2016 were revised down to 0%. And rising to 1.1%, and 1.5% the next two years.