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.
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.