26 Apr

State Firms’ Debt May Threaten Financial Stability, Central Bank Says

The inability of South African state-owned companies to roll over debt could threaten the nation’s financial stability and ultimately result in more credit-rating downgrades, according to the central bank.

Governance issues at state companies, rising contingent liabilities and inadequate liquidity could add pressure to government finances through the increased use of guarantees, the Reserve Bank said in its six-monthly Financial Stability Review released in Pretoria on Wednesday.

“Financial stability centers around the ability of state-owned enterprises to roll over debt and achieve financial consolidation,” the central bank said. “Should state-owned enterprises fail to roll over debt, the government would be liable and might not be able to honor such debt.”

Ratings companies have flagged state firms’ finances as a concern in recent years. While Moody’s Investors Service kept the nation’s credit rating at investment grade and changed the outlook to stable from negative last month, it warned if risks at these companies materialize and increase the government’s debt burden, it could lead to downgrades.

Government guarantees to state companies are at more than 450 billion rand ($36 billion), according to data from the National Treasury. The state’s exposure to this increased to 64.5 percent in the past fiscal year from 54.4 percent as companies drew on the guarantees.

Power utility Eskom Holdings SOC Ltd. is the single biggest recipient of guarantees at 221 billion rand, followed by the Road Accident Fund at 189 billion rand, the central bank said. South African Airways said Tuesday it needs 5 billion rand from the government to cover immediate costs and warned it may struggle to make debt repayments due next year.

The rand, which has declined 0.5 percent versus the U.S. dollar this year, was little changed on Thursday morning at 12.4435 per dollar.

Source: https://www.bloomberg.com/news/articles/2018-04-25/state-firms-debt-may-threaten-financial-stability-sarb-says

26 Jan

Central Bank in Africa’s Top Bitcoin Market Warns of ‘Gamble’

The central-bank governor of Nigeria, where bitcoin trading grew the most in Africa last year, said investing in the cryptocurrency is a “gamble” and hinted it may have to be regulated.

“Cryptocurrency or bitcoin is like a gamble, and there is a need for everybody to be very careful,” Central Bank of Nigeria Governor Godwin Emefiele said in an interview on Wednesday at his office in the capital, Abuja. “We cannot as a central bank give support to situations” where people risk savings to “gamble,” he said.

Emefiele is the latest among regulators globally to express concern about bitcoin, one of the most popular cryptocurrencies, because of high volatility and a perception that it facilitates crime.

In January 2017, the central bank released a circular to lenders asking them not to use, hold, or trade virtual currencies pending “substantive regulation and or decision by the CBN.”

Still, demand for the digital currency is surging in West Africa’s biggest economy, with peer-to-peer transactions rising almost 1,500 percent this year, second only to China, according to data from LocalBitcoins.

A bitcoin wipe-out would generate the biggest losses in Russia, followed by New Zealand and Nigeria, according to a report published by Citigroup Inc. in December.

Bitcoin was little changed at $11,254 by 7:12 a.m in London compared with an intraday high of $19,511 on December 18, according to a composite of prices compiled by Bloomberg.

U.K. Prime Minister Theresa May on Thursday promised to consider clamping down on the cryptocurrency. Central banks in China and Russia have stopped local-exchange trading of bitcoin.

“I have asked my colleagues in the research and monetary-policy department to study the market and get to know what the issues are,” Emefiele said. The central bank may in future “make some very concrete pronouncements as to the direction,” he said, without giving details.