CAPE TOWN — South Africa will use a third of its gold and foreign exchange reserves to manage runaway debt and create spending room in an election year. Finance minister Enoch Godongwana announced this unusual move in the country’s parliament in Cape Town on Wednesday.
The announcement came a day after President Cyril Ramaphosa announced that the country’s general elections would be held on May 29. The ruling African National Congress (ANC) faces its toughest campaign since Nelson Mandela led it to power in 1994 to end apartheid rule.
South Africa will withdraw 150 billion rand ($8 billion) over three years. Godongwana said steps will be taken to ensure that sufficient buffers are available to absorb exchange rate swings and the solvency of the Reserve Bank is not compromised. The financial markets seemed to welcome the move, with the currency appreciating while bond yields went down.
The country’s biggest worker union federation also welcomed the move. “It is critical these reserves be used strategically to stabilize and rebuild Eskom and Transnet in particular, as this can only be a once off relief and needs to be utilized to grow the economy and reduce unemployment,” said Matthew Parks, spokesman for the Congress of South African Trade Union.
