Standard Bank deal keeps SA solvent

Robert Laing

Robert Laing

A hefty injection of foreign direct investment from the Industrial and Commercial Bank of China's acquisition of 20percent of Standard Bank helped South Africa keep its head above water after the bill for the third an final arms deal submarine.

The Reserve Bank's bulletin on the country's finances for the first quarter showed Eskom closing the mines in January caused the current account deficit to widen to nine percent of gross domestic product (GDP), its worst level since 1982.

While the power crisis caused annualised GDP growth to dive to 2,1percent for the first quarter from more than five percent last year, gross domestic expenditure (GDE) accelerated to 14,2percent.

Besides the submarine, the Reserve Bank attributed the spurt in GDE to Eskom building its coal reserves up again and other government spending.

The jump in GDE came despite severe belt tightening by households. The growth in overall household consumption was 3,3percent in the first quarter, less than half the 7,2percent during the same period last year.

Having less money caused households to save less, resulting in the gross saving ratio of the household sector declining marginally.

The Standard Bank deal saw a R40,6billion inflow of foreign direct investment despite Naspers moving R6,1billion out of the country for its acquisition of Poland's Tradus.

But the electricity crisis spooked foreign and local investors.

Foreign investors withdrew R19billion during the quarter, and local investors built their offshore holdings up by R1,5billion.