Tabulación de la encuesta aplicada a Estudiantes de Décimo Año de

South Africa, arguably one of Africa’s most industrialised countries has emerged194 _{from its colourful historic past to become a major economic player} in the continent as well as a global partner195 _{on a host of international issues.} As one of Africa’s leading importers196

of commodities particularly from Asia, South Africa’s economy prior to the global financial crisis enjoyed large increases in inflow of foreign capital resulting in steady economic growth. However, in the five years197 preceding the crisis, growth rates had begun to fall. See table 2.14 in Appendix 2. This decline in the growth of the economy was dealt a further blow when demand for export commodities fell.

Impact on Banking Sector

It has been suggested that the South African banking and financial markets industry continued to function effectively during the crisis and were able to withstand the impact of the global financial crisis, due to the fact that the banking and finance institutions in South Africa were not highly exposed198 _to sub-prime mortgage related products. This level of protection accorded to the

192 _{I Salami, ‘The Effect of the Financial Crisis on the Nigerian Capital Market: A Proper} Regulatory Response’, (2009) Journal of International Banking Law and Regulation Volume 24(12), 612.

193 _{The South African Reserve Bank, ‘The International Banking Crisis and Domestic} Financial Intermediation in Emerging Market Economies: Issues for South Africa’ 2010, 365 (BIS Paper No 54).

194

Since 1990, when former South African President F.W. de Klerk announced the end of apartheid and set in motion a programme towards the repeal of apartheid laws.

195

South Africa was invited to join the G20 in 2010.

196 _{See Mohammed Nureldin Hussain, Kupukile Mlambo and Temitope Oshikoya, ‘Global} Financial Crisis: An African Perspective’AfDB (Blackwell Publishers 1999).

197 _{Margaret Chitiga, ‘The Impact of the global financial and economic crisis on South Africa’} [2010].

198 _{Since ‘vehicles’ used in the trade of asset-backed commercial paper are prevented from} investing beyond the shores of South Africa – See IMF Country Report No. 08/349: ‘South Africa Financial System Stability Assessment’, including Report on the Observance of Standards and Codes on the following topic: Securities Regulation October 2008.

banking institutions in South Africa irrespective of their dealings in derivatives199_{, has been credited to the sound macroeconomic policies and} risk awareness that have been incorporated into their banking and finance regulations200_.

Regardless of the level of protection provided by the existing banking regulations in South Africa, the Monetary Policy Committee of the South African Reserve Bank (SARB) cut its policy rate by about 500 basis points. Bizarrely, the SARB stated that the changes in policy rate were neither effected201 _{to assist their banking sector nor was it a reaction to the global} financial crisis.

Notwithstanding this, it became quite evident during the financial crisis that availability of liquidity had become a global issue, particularly for banks involved in the global inter-bank markets and although South African banks were generally not dependent on foreign funding, cross-border bank lending also fell202_{. While the decline in cross-border lending may have been due to} other reasons203 _{other than increase in cost of lending, there is the possibility} that the decrease in the policy rate of 500 basis points followed by subsequent cuts up to 6.5% was on the contrary, designed to stimulate lending within the economy, especially amongst local banks in South Africa. This view by the author seems to be consistent with the impression created by South African banks, that regardless of the impact the crisis had on the price and the maturity dates in cross-border lending, the ability of South African banks to obtain funds through lending was still possible. Thus the local inter- bank banking activities were not seriously affected and banks functioned

199

Types of financial instruments used to transfer financial risk in a given asset without the transfer of that asset.

200

The South African Reserve Bank BIS Paper No 54 (n193). 201

The SARB, according to its exchange rate policy of non-intervention suggested that exchange levels should always be determined by market forces and not through policy intervention.

202

This has been attributed to a combination of supply and demand factors, where the cost of lending had been increased by foreign lending banks, thus resulting in the decline in borrowing by South African banks from foreign banks.

203

Such as where foreign banks in South Africa may have had to divert funds to branches or their parent banks in Europe and elsewhere to help shore-up their bank balances and improve their balance sheet figures.

normally albeit with a heightened sense of care and general preference for a shorter maturity time-frame.

Towards the end of 2009, there was a decline in the level of the South African Reserve Bank’s gross reserves by US$500 million to US$ 33.8 billion, but this was attributed to a decline in the price of gold coupled with the appreciation in the exchange rate value of the US dollar. Also, by the end of February 2009, it was reported that the SARB had reduced the level of borrowed reserves to US$640 million having originally been at a high of US$ 3.5 billion in 2006. Unsurprisingly, the SARB suggested that this was an important strategic move, taken to reflect the good state of health of South Africa’s foreign reserves.

Impact on Stock Market

Thus, even though there was a general decline in capital inflows, this value was significantly outweighed by the volume of capital outflow from the country204_{. This resulted in the poor performance of equity markets in South} Africa, with the Stock Market (J.S.E.) recording a loss. Table 2.15 in Appendix 2 shows the losses of the South African Stock Market in comparison to other Emerging countries.

There was also a decrease in the volume of international bonds205 _{issued by} South Africa and although South Africa is not heavily dependent on borrowing internationally, this decline was quite significant as it probably indicated a shift in investor’s needs and priorities and also a preference for assets of better quality hence their decision to look elsewhere.

Table 2.16 in Appendix 2206_{, shows Financial Soundness Indicators for South} Africa from 2002 – 2007 indicating that capital adequacy increased slightly from 12.3 in 2006 to 12.8 in 2007 just before the global financial crisis begun

204

A total volume of US$ 5.7 billion worth of portfolio investment left South Africa in the last quarter of 2008, an increase on the US$ 1 billion that had taken flight in the previous third quarter of the same year. See Victor Murinde, Bank Regulatory Reforms in Africa (1st Edition, Palgrave Macmillan 2012).

205 _{From a high figure of 9,814 in 2007 to 1,533 in 2008 – See IMF, ‘Global Financial Stability’} Report Database.

206 _{Taken from IMF Country Report No. 08/349, ‘Financial Stability Assessment Report} (FSAP), South Africa’, Appendix Table 4, 2008.

in 2007 and the return on equity figures decreased slightly from 18.3 in 2006 to 18.1 in 2007.