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Sarb ready to help government with vaccine payments

Sarb governor Lesetja Kganyago made the announcement on Thursday.
Image: Dean Hutton/Bloomberg

South African Reserve Bank (Sarb) Governor Lesetja Kganyago announced on Thursday that the central bank is willing to help the government with the funds required to purchase the Covid-19 vaccine.

Although  the government has not indicated how much it would need to procure vaccines from international  various manufactures, Kganyago said the payments would likely require foreign currency.

“To the extent that the vaccine must be sourced from overseas, government will need foreign exchange and as a banker to the government, government is welcome to purchase foreign exchange from us to fund the vaccine,”he said.

Kganyago added that the government might not need to turn to the central bank for foreign exchange because it has a positive “balance in [its] foreign exchange account” and the government could simply draw on that to purchase the vaccine.

The Sarb governor was however emphatic that vaccine procurement and distribution is not a function or responsibility of the central bank, but rather that the government is tasked with the responsibility.

South Africa is aiming to vaccinate 67% of its population to achieve herd immunity. The vaccine will be given out in three phases beginning with frontline healthcare workers, followed by other essential workers and high-risk groups before trying to reach the wider population.

Last week, President Cyril Ramaphosa said the country is set to receive an initial 20 million doses of the vaccine. The first 1.5 million doses are set to come from AstraZeneca and to arrive later this month.

South Africa is also part of the global Covax programme, which aims to help ensure equitable access to a Covid-19 vaccine.

Read:
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Fake news could jeopardise SA vaccine rollout

The country, like many others, is facing a second wave of infections.

During a Monetary Policy Committee (MPC) briefing on Thursday, announcing its decision to keep rates unchanged at 3.5% and the prime lending rate at 7%, Kganyago said the waves of infection will continue until vaccine distribution is widespread and populations develop sufficient immunity to curb virus transmission.

The rollout of vaccines is expected to boost global growth prospects generally. The central bank however expects growth in the first quarter of 2021 to remain muted following significant decreases in GDP in 2020. The MPC expects the growth rate for 2020 to be -7.1%, compared with the 8% contraction expected at the time of the November meeting.

“New waves of the Covid-19 virus are likely to periodically weigh on economic activity both globally and locally. In addition, constraints to the domestic supply of energy, weak investment and uncertainty about vaccine rollout remain serious downside risks to domestic growth,” Kganyago said.

The decision to hold rates is in line with the Sarb’s continued monetary policy steps to mitigate the economic fallout of the Covid-19 pandemic.

Although the decision to hold rates was largely anticipated by the market, chief executive of the Pam Golding Property group, Andrew Golding says a further rate cut would have been welcomed by aspirant first-time home buyers and existing homeowners with mortgages.

“Rather than cutting interest rates further, the Reserve Bank may opt instead to keep rates lower for longer, which would be facilitated by inflation remaining below the mid-point of the Reserve Bank’s 3%-6% inflation target,” he said in a statement.

Sarb’s Quarterly Projection Model (QPM) forecasts increases of 25 basis points in the second and third quarters of 2021.

Senior agricultural economist at FNB Agribusiness Paul Makube says the lower rates were positive for the agriculture sector “especially at the height of agricultural activity and increased credit demand.”

“Strong commodity prices have also helped keep farmers afloat, although there are pockets of Covid-19 induced challenges such as the wine value chain,” Makube said in a statement.

Read: Sarb may surprise with a rate cut, says FNB’s property economist

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This man is a star. Good decision.

I read somewhere that govt were considering taxing the wealthy to fund the vaccine! That’s one option I suppose. I hope not, cause it’ll certainly have consequences, eg. Emigration and laying off of workers. Tax me anymore and goodbye to those I give employment to.

Has our President donated from his personal billions?

Just print da maaney !!!

You are right! The Reserve Bank does not have any money of its own. It merely controls the purchasing power of the national currency, not the currency itself. Whatever funds the Reserve Bank makes available must dilute the value of the currency for everyone else. The Reserve Banks spends it on behalf of everyone who owns currency and in direct proportion to their holdings.

The friendly and very competent Governor is the lender of last resort to the banking system, which is the largest lender to government, which means you, yes you, are the lender of last resort to government. To make a long story short, you are funding your neighbour’s vaccine, even if you don’t believe in vaccines. You deserve a star for benevolence!

Every central bank is helping their government with this, why our central bank went on vacation, i don’t know … it is really disappointing …. majority of governments even developed countries don’t have money … they are relying on central banks.

Notice how Kganyago puts an air-gap between himself and the rollout. We will fund but are NOT responsible for implementation.

On second thoughts, maybe he could establish a project office to oversee this and scuttle the submarines…

There is a 16b hole in the 20.6b budget!

I would assume that the lion share of this expenditure can be paid in
ZAR if the BEE “facilitators ” would graciously accept their cut in local currency.

End of comments.

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