BoN not concerned about capital outflows

South Africa’s policy announcement set for Thursday SA’s policy announcement set for Thursday
Phillepus Uusiku
Despite the interest rate differential of 0.50% between South Africa and Namibia, the Bank of Namibia (BoN) is not concerned about capital flows.

According to BoN’s spokesperson Kazembire Zemburuka, the minimum intervention threshold at which the level of foreign reserves shall be considered inadequate is defined as the foreign reserves falling short of the following coverage ratios: (1) currency in circulation plus a 12-month average of cross-border transfers and short-term external debt or (2) three months’ worth of imports.

As at 31 October 2023, the preliminary foreign exchange level stood at N$53.369 billion which covers ratio (1) by 5.3 times and ratio (2) by 5.5 months’ worth of imports.

At these levels, the foreign exchange reserves are considered adequate to support the peg to the South African rand. Given this background, the Bank of Namibia is not concerned with the current run rate of outflows, he said.

Between January and October, commercial bank outflows amounted to N$17.9 billion versus N$12.5 billion recorded in the corresponding period of 2022. Outflows are cushioned by a significant increase in quarterly Southern African Customs Union (SACU) receipts and occur against a backdrop of increased trade as projects in the pipeline require imported machinery to gain traction, Zemburuka pointed out.

According to the Namibia Statistics Agency (NSA), Namibia’s import bill stood at N$N$7.8 billion in September.


The South African Reserve Bank (SARB) sixth and last monetary policy announcement for the year is expected to take place on 23 November. At the previous monetary policy announcement in September, SARB decided to keep the repo rate unchanged at 8.25% for the second consecutive time.

Consumer price inflation (CPI) in South Africa increased to 5.4% in September from 4.8% in August, according to Stats SA.

The South African Reserve Bank (SARB) monetary policy committee prefers to anchor inflation expectations close to the 4.5% midpoint of its 3%-6% target range. Inflation in Namibia increased to 6% in October.

According to IJG Securities, a similar uptick in the South African CPI rate could prompt the hawkish SARB to hike rates by 25bps at its November MPC meeting. All eyes will then be on the BoN to see whether they follow in-kind on 05 December. –