{"id":61940,"date":"2024-02-28T16:35:15","date_gmt":"2024-02-28T16:35:15","guid":{"rendered":"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-south-africas-r500-billion-waterfall-fund-will-work"},"modified":"2024-02-28T16:59:26","modified_gmt":"2024-02-28T16:59:26","slug":"how-south-africas-r500-billion-waterfall-fund-will-work","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-south-africas-r500-billion-waterfall-fund-will-work","title":{"rendered":"How South Africa\u2019s R500 billion \u2018waterfall\u2019 fund will work"},"content":{"rendered":"

Africa-Press – South-Africa. <\/strong><\/span>National Treasury has outlined the changes it wants to make to the Gold and Foreign Contingency Reserve Account (GFECRA) through the GFECRA Defrayal Amendment Bill \u2013 which will not only allow it to tap into the fund now and in the future, but also change the entire framework of the reserve going forward.<\/p>\n

As announced in the 2024 budget, National Treasury will tap into the South African Reserve Bank\u2019s GFECRA to access R150 billion in funding. The fund is currently valued at around R500 billion, with the effective \u201cwithdrawal\u201d from the fund being R250 billion, where R100 billion will be pumped back in as a contingency fund.<\/p>\n

To initiate this whole process, the finance department aims to introduce new laws that will change the entire structure of the reserve, effectively splitting it into three pools of funds \u2013 one of which will be accessible by the Treasury.<\/p>\n

Briefing the Standing Committee on Appropriations, Treasury said that this \u2018waterfall\u2019 structure would ensure that the Reserve Bank always have a buffer to protect it from any shocks in the market; there will be adequate contingencies so the central bank won\u2019t have to worry about funding; and any \u2018excess\u2019 can be fed to National Treasury, where it is owed.<\/p>\n

\u201cUnder the old GFECRA settlement framework, most amounts that entered GFECRA went unsettled, and so the account grew steadily larger as a result of currency depreciation,\u201d said Treasury.<\/p>\n

\u201cUnder the new framework, by contrast, GFECRA balances are distributed, in a \u2018waterfall\u2019 arrangement, to three \u2018pools\u2019,\u201d it said.<\/p>\n

Pool 1 \u2013 R250 billion<\/p>\n

The first pool is labelled as the \u2018GFECRA buffer\u2019 and is being set at R250 billion.<\/p>\n

This is a backup fund that plans to absorb any substantial rand appreciation shocks without causing negative balances.<\/p>\n

\u201cBy minimising risks that the GFECRA account turns negative, this buffer will help protect NT from having to be paid out to the account to make it positive again,\u201d said Treasury.<\/p>\n

Pool 2 \u2013 R100 billion<\/p>\n

Once the first pool is sufficiently filled, any additional funds will be directed towards the second pool, which is the contingency reserve buffer managed by SARB.<\/p>\n

This buffer\/second pool will receive R100 billion \u201cto protect the SARB\u2019s policy solvency, defined as the flexibility to pursue mandates without concern for the financial position,\u201d said Treasury.<\/p>\n

Treasury said that it would be replenished from excess GFECRA balances when available and is meant to be large enough to last through extended periods when these top-up funds from GFECRA are not available.<\/p>\n

Pool 3 \u2013 R150 billion<\/p>\n

Announced in the 2024 budget, the National Treasury will receive R150 billion that will be used to reduce the government\u2019s borrowing.<\/p>\n

R100 billion will be utilised in 2024\/25, R25 billion in 2025\/26 and R25 billion in 2026\/27.<\/p>\n

\u201cAs a result, debt service costs will reduce by R30.2 billion over the medium-term, which is accompanied by a reduction in the growth in the stock of debt,\u201d said Treasury.<\/p>\n

Liquidity management costs of these payouts are expected to be around R8 billion in 2024, R10 billion in 2025 and R12 billion in 2026.<\/p>\n

What guides this new framework?<\/p>\n

According to the National Treasury, under the proposed framework, there are several key restrictions:<\/p>\n

The GFECRA balance settlement cannot affect the solvency of the SARB;<\/p>\n

No sale of foreign exchange reserves can be made to realize GFECRA gains if the reserves are below the estimated adequacy levels;<\/p>\n

Settlement of unrealized balances on the GFECRA that could be reversed by future currency reversals is prohibited;<\/p>\n

The credit balance settlement on the GFECRA will be used to reduce government borrowing;<\/p>\n

Future GFECRA fund settlements will be governed by an agreement and a relevant schedule.<\/p>\n

For More News And Analysis About South-Africa<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – South-Africa. National Treasury has outlined the changes it wants to make to the Gold and Foreign Contingency Reserve Account (GFECRA) through the GFECRA Defrayal Amendment Bill \u2013 which will not only allow it to tap into the fund now and in the future, but also change the entire framework of the reserve going […]<\/p>\n","protected":false},"author":84,"featured_media":61938,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,5],"tags":[274,315,275],"class_list":["post-61940","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","tag-africa-press","tag-africa-press-south-africa","tag-south-africa-2"],"yoast_head":"\nHow South Africa\u2019s R500 billion \u2018waterfall\u2019 fund will work - South Africa<\/title>\n<meta name=\"description\" content=\"National Treasury has outlined the changes it wants to make to the Gold and Foreign Contingency Reserve Account (GFECRA) ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-south-africas-r500-billion-waterfall-fund-will-work\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How South Africa\u2019s R500 billion \u2018waterfall\u2019 fund will work\" \/>\n<meta property=\"og:description\" content=\"National Treasury has outlined the changes it wants to make to the Gold and Foreign Contingency Reserve Account (GFECRA) ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-south-africas-r500-billion-waterfall-fund-will-work\" \/>\n<meta property=\"og:site_name\" content=\"South Africa\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2024-02-28T16:35:15+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-02-28T16:59:26+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2024\/02\/sm_1709126868.784677.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"800\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-south-africas-r500-billion-waterfall-fund-will-work#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-south-africas-r500-billion-waterfall-fund-will-work\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"How South Africa\u2019s R500 billion \u2018waterfall\u2019 fund will work\",\"datePublished\":\"2024-02-28T16:35:15+00:00\",\"dateModified\":\"2024-02-28T16:59:26+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-south-africas-r500-billion-waterfall-fund-will-work\"},\"wordCount\":620,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-south-africas-r500-billion-waterfall-fund-will-work#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2024\/02\/sm_1709126868.784677.jpg\",\"keywords\":[\"Africa Press\",\"Africa Press-South-Africa\",\"South-Africa\"],\"articleSection\":[\"all news\",\"economy\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-south-africas-r500-billion-waterfall-fund-will-work#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-south-africas-r500-billion-waterfall-fund-will-work\",\"url\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-south-africas-r500-billion-waterfall-fund-will-work\",\"name\":\"How South Africa\u2019s R500 billion \u2018waterfall\u2019 fund will work - 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