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Reserve Bank

MTN’s Nigeria feud a risk to SA’s financial system: Reserve Bank

MTN Group’s fight with Nigerian authorities over $10-billion in repatriated funds and back taxes could increase risk in South Africa’s financial system depending on the outcome, the Reserve Bank said. Original Link

SA banks urged to innovate as new entrants circle

South Africa will strive to allow competition into its banking system in a way that won’t threaten the stability of the industry as more and more entrants seek to rival the nation’s biggest lenders. Original Link

SA needs an independent, hi-tech central bank

The Reserve Bank pioneered Project Khokha to drive consensus and adoption of blockchain systems in South Africa’s financial sector, a highly proactive action similar to other astute emerging markets such as Dubai and Singapore. Original Link

SA fintech policy to take shape in 2019

The Intergovernmental FinTech Working Group (IFWG) is taking steps to formalise South Africa’s stance on fintech and innovation, aiming to produce a draft policy paper by early 2019.

The paper is set to present government’s take on developments in the sector for the first time since at least December 2014, when the South African Reserve Bank (Sarb) issued a position paper on virtual currencies.

At the time, the central bank opted not to oversee, supervise or regulate the virtual currency landscape as it posed no threat to financial stability. The Sarb did, however, reserve its right to change its position “should the landscape warrant regulatory intervention”.

The decision to draft a policy paper is one of two outcomes of the inaugural workshop of the IFWG — comprising representatives from national treasury, the Sarb, Financial Sector Conduct Authority and Financial Intelligence Centre — held in April this year. According to treasury, the workshop brought regulators, policy makers and industry players together to develop a “harmonised” approach to fintech-driven innovation and consider appropriate policies and regulatory frameworks.

The decision to draft a policy paper also comes amid calls for regulation, in a bid to bring legitimacy and stability to the industry, from some fintech players. Moneyweb previously reported that some industry players likened navigating the unregulated landscape to innovating in a dark room, in that firms did not have a clear understanding of which laws applied to them or how to respond to each other. Others, however, expressed concerns that regulation would stifle innovation.

The paper is to take such concerns as well as those raised at the workshop and through dedicated fintech workstreams into account. The workshop focused on private cryptocurrencies, crypto exchanges and initial coin offerings. Fintech’s potential impact on financial inclusion and associated risks, including consumer protection, and likely policy or regulatory solutions were also among the topics covered. It also sought to learn from the experiences of regulators that have implemented measures to facilitate innovation.

In addition to drafting a policy paper, the IFWG resolved to host another industry workshop by year-end.

  • This article was originally published on Moneyweb and is used here with permission

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Inflation slows to 5-year low

Image: Steve Buissinne

South Africa’s inflation rate fell in May as food prices rose at the slowest pace since 2013, reducing chances that the central bank will increase interest rates later this year.

Consumer prices climbed 4.4% from a year earlier compared to 4.5% in April, Statistics South Africa said on Wednesday in a report on its website. The median estimate in a Bloomberg survey was 4.6%.

Prices of food and non-alcoholic beverages climbed 3.4% from a year earlier, the least since December 2013. That helped curb the inflationary effects of a third straight month of rand weakness in May.

The price of oil, which climbed to the highest since 2014 last month, poses a threat to the inflation outlook and the central bank sees an upside risk to its crude-cost assumptions, governor Lesetja Kganyago said on 24 May, when he held the benchmark rate at a two-year low of 6.5%. It targets inflation in a range of 3-6%.

The rand’s plunge to the weakest in almost seven months against the dollar this week may push up inflation and require interest-rate increases, central bank deputy governor Kuben Naidoo said in an interview with Bloomberg TV on Tuesday. While the bank doesn’t target a specific level of the rand, it responds to second-round effects on prices from currency weakness, he said.

“It’s correct that they sound hawkish because that helps to anchor inflation expectations,” Gina Schoeman, an economist at Citigroup Global Markets, said by phone. “The Reserve Bank is not going to hike rates until it’s convinced that it absolutely has to. You can’t pass through high inflation if consumers cannot accept it, if they don’t have the spending power.”

Forward-rate agreements, which are used to speculate on interest rates, show the market expects the key interest rate to be 24 basis points higher in six months.

Core inflation, which excludes the price of food, non-alcoholic beverages, energy and petrol, was 4.4% in May.

The rand strengthened 0.5% to R13.68/US$ by 11.52am in Johannesburg.  — Reported by Odwa Mjo, (c) 2018 Bloomberg LP

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Inflation slows to 5-year low

Image: Steve Buissinne

South Africa’s inflation rate fell in May as food prices rose at the slowest pace since 2013, reducing chances that the central bank will increase interest rates later this year.

Consumer prices climbed 4.4% from a year earlier compared to 4.5% in April, Statistics South Africa said on Wednesday in a report on its website. The median estimate in a Bloomberg survey was 4.6%.

Prices of food and non-alcoholic beverages climbed 3.4% from a year earlier, the least since December 2013. That helped curb the inflationary effects of a third straight month of rand weakness in May.

The price of oil, which climbed to the highest since 2014 last month, poses a threat to the inflation outlook and the central bank sees an upside risk to its crude-cost assumptions, governor Lesetja Kganyago said on 24 May, when he held the benchmark rate at a two-year low of 6.5%. It targets inflation in a range of 3-6%.

The rand’s plunge to the weakest in almost seven months against the dollar this week may push up inflation and require interest-rate increases, central bank deputy governor Kuben Naidoo said in an interview with Bloomberg TV on Tuesday. While the bank doesn’t target a specific level of the rand, it responds to second-round effects on prices from currency weakness, he said.

“It’s correct that they sound hawkish because that helps to anchor inflation expectations,” Gina Schoeman, an economist at Citigroup Global Markets, said by phone. “The Reserve Bank is not going to hike rates until it’s convinced that it absolutely has to. You can’t pass through high inflation if consumers cannot accept it, if they don’t have the spending power.”

Forward-rate agreements, which are used to speculate on interest rates, show the market expects the key interest rate to be 24 basis points higher in six months.

Core inflation, which excludes the price of food, non-alcoholic beverages, energy and petrol, was 4.4% in May.

The rand strengthened 0.5% to R13.68/US$ by 11.52am in Johannesburg.  — Reported by Odwa Mjo, (c) 2018 Bloomberg LP

Original Link

Inflation slows to 5-year low

Image: Steve Buissinne

South Africa’s inflation rate fell in May as food prices rose at the slowest pace since 2013, reducing chances that the central bank will increase interest rates later this year.

Consumer prices climbed 4.4% from a year earlier compared to 4.5% in April, Statistics South Africa said on Wednesday in a report on its website. The median estimate in a Bloomberg survey was 4.6%.

Prices of food and non-alcoholic beverages climbed 3.4% from a year earlier, the least since December 2013. That helped curb the inflationary effects of a third straight month of rand weakness in May.

The price of oil, which climbed to the highest since 2014 last month, poses a threat to the inflation outlook and the central bank sees an upside risk to its crude-cost assumptions, governor Lesetja Kganyago said on 24 May, when he held the benchmark rate at a two-year low of 6.5%. It targets inflation in a range of 3-6%.

The rand’s plunge to the weakest in almost seven months against the dollar this week may push up inflation and require interest-rate increases, central bank deputy governor Kuben Naidoo said in an interview with Bloomberg TV on Tuesday. While the bank doesn’t target a specific level of the rand, it responds to second-round effects on prices from currency weakness, he said.

“It’s correct that they sound hawkish because that helps to anchor inflation expectations,” Gina Schoeman, an economist at Citigroup Global Markets, said by phone. “The Reserve Bank is not going to hike rates until it’s convinced that it absolutely has to. You can’t pass through high inflation if consumers cannot accept it, if they don’t have the spending power.”

Forward-rate agreements, which are used to speculate on interest rates, show the market expects the key interest rate to be 24 basis points higher in six months.

Core inflation, which excludes the price of food, non-alcoholic beverages, energy and petrol, was 4.4% in May.

The rand strengthened 0.5% to R13.68/US$ by 11.52am in Johannesburg.  — Reported by Odwa Mjo, (c) 2018 Bloomberg LP

Original Link

Reserve Bank in successful blockchain payments trial

The South African Reserve Bank, through its fintech unit, has successfully demonstrated a real-world trial of a distributed ledger technology (DLT)-based wholesale payment system.

The Bank has released a report on Project Khokha, which focused on providing participants, including South African banks, practical experience of aspects of using a distributed ledger for payments. Different deployments models were tested.

“The results show that the typical daily volume of the South African payments system could be processed in less than two hours with full confidentiality of transactions and settlement finality,” the Bank said in a statement. “Transactions were processed within two seconds, across a network of geographically distributed nodes, with distributed consensus providing the requisite resilience. The Bank was able to view the detail of all the transactions to allow for regulatory oversight.”

The project was built on Quorum, using “Istanbul Byzantine Fault Tolerance”, “Pedersen commitments” and “range proofs” to deliver on the combination of scalability, resilience, confidentiality and finality, it said.

“Central banks widely recognise the disruptive potential of and the probable risk from fintech. This prompted the Reserve Bank to initiate structures to monitor and gain insight for the development of appropriate policy frameworks and responses to changes emanating from fintech.”

The first of these structures is the Bank’s fintech unit, which was established in August 2017 to assess the emergence of fintech in a structured and organised manner, and to consider its regulatory and strategic implications.

“The objectives of Project Khokha were thus to build on the initiatives previously undertaken by global peers and to gain further insights on DLT developments in a South African wholesale payments context,” the Bank said in the statement. “The project provided the opportunity to broaden the DLT skills base in the South African banking industry and presented an opportunity to explore the type of collaborative innovation that is expected to become more common.”

‘Many issues to consider’

It said the project has laid the foundations for future collaborative work — essential in the blockchain context — and has fulfilled its objective of providing useful insights to all participants. The report concluded that there are “many issues to consider before the decision to take a DLT-based system into production can be taken. Some of these issues relate to the practicalities of implementation, but also to legal and regulatory factors and to the broader economic impact.”

One objective of Project Khokha is to provide a better understanding of how the South African Multiple Option Settlement (Samos) system would integrate with a DLT system. The intention is not to consider changing the approach with the Samos replacement, but to provide input to that project, the Bank said.

“The future direction will also be influenced by further development of the technology and by central banks and other regulators globally continuing to contribute to this field of knowledge. The Reserve Bank anticipates continuing work in this area and expects to continue contributing to the body of work in DLT-based systems.”  — © 2018 NewsCentral Media

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Cryptos are tokens, not currency: SA Reserve Bank

South Africa’s central bank chooses to call digital currencies such as bitcoin “cyber-tokens” because they don’t meet the requirements to be classified as money.

“We don’t use the term ‘cryptocurrency’ because it doesn’t meet the requirements of money in the economic sense of the stable means of exchange, a unit of measure and a stable unit of value,” Reserve Bank deputy governor Francois Groepe told reporters in Pretoria on Thursday. “We prefer to use the word ‘cyber-token’.”

Digital currencies such as bitcoin and ethereum are becoming increasingly popular, with regulators in some countries struggling to move fast enough to manage them. The Reserve Bank has established a fintech unit to review its position on private cryptocurrencies and to help draw up an appropriate policy framework and regulatory regime.

“We want to ensure or establish whether there is still compliance with the relevant financial surveillance or exchange control regulations,” Groepe said.

South Africa’s Reserve Bank isn’t the first to voice reservations about digital currencies. In January, Nigerian governor Godwin Emefiele said investing in bitcoin is a “ gamble”. Bank for International Settlements GM Agustin Carstens said in an interview with the German newspaper Boersen-Zeitung this week he prefers to call these currencies “crypto assets”.  — Reported by Amogelang Mbatha, Ntando Thukwana and Odwa Mjo, with assistance from Ana Monteiro and Robert Brand, (c) 2018 Bloomberg LP

Original Link

Inflation falls to 7-year low

Image: Steve Buissinne

South Africa’s inflation rate fell to seven-year low in March, moving further below the midpoint of the central bank’s target range.

Inflation slowed to 3.8% from a year earlier compared to 4% in February, Pretoria-based Statistics South Africa said Wednesday in a report on its website. The median estimate of 20 economists was 4.1% in a Bloomberg survey. Prices rose 0.4% in the month.

Price growth has remained within the central bank’s target range of 3-6% for a 12th consecutive month, the longest run since 2015. The Reserve Bank projects inflation will remain within the band until at least 2020, stabilising at just more than 5%, according to the Monetary Policy Review released on 11 April.

Policymakers last month cut the repurchase rate by a quarter percentage point to 6.5%, the lowest level in two years, with governor Lesetja Kganyago saying the bank wanted to see inflation close to the midpoint of the target.

Since President Cyril Ramaphosa’s ascent to power following former President Jacob Zuma’s scandal-ridden tenure, the rand has strengthened against the dollar, gaining 9.1% since mid-December when he was elected leader of the ANC.

Food prices rose 3.6% from a year earlier, less than the 4% increase in February and the slowest rate of growth since December 2013.

Core inflation, excluding the price of food, non-alcoholic beverages, energy and petrol, was 4.1% in March, matching February’s figure.  — Reported by Ntando Thukwana, (c) 2018 Bloomberg LP

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South Africa’s inflation rate slows to 4.4%

Image: Steve Buissinne

South Africa’s inflation rate slowed in January, easing pressure on the central bank to maintain a tight monetary stance.

Inflation slowed to 4.4% from 4.7% in December, Statistics South Africa said Wednesday in a report on its website. The median of 14 economists’ estimates in a Bloomberg survey was for 4.4%. Prices rose 0.3% in the month.

Price growth has been within the Reserve Bank’s target range of between 3-6% for 10 months, the longest run since 2015. The monetary policy committee left its benchmark lending rate unchanged for the third straight meeting last month as the risk of a credit-ratings downgrade persists.

“I think for at least two quarters it will remain around the midpoint, thereafter it may trend higher,” Elize Kruger, senior economist at NKC Economics, said by phone before the release of the data. The good inflation numbers “will hopefully convince the Reserve Bank that there is scope for a bit of loosening”.

While the central bank has highlighted the rand as a key risk to price growth, it expects inflation to remain within the target band. South Africa’s currency was one of the most volatile tracked by Bloomberg last year and has gained 8.6% against the dollar since Cyril Ramaphosa was elected to lead the ANC in December. Ramaphosa has since replaced Jacob Zuma as president of the country.

Core inflation, which excludes the prices of food, non-alcoholic beverages, energy and petrol, slowed to 4.1% in January, from 4.2%.  — Reported by Arabile Gumede, with assistance from Simbarashe Gumbo, (c) 2018 Bloomberg LP

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Reserve Bank to conduct review into cryptocurrencies

The South African Reserve Bank said on Tuesday that it will complete a review into cryptocurrencies, including bitcoin, before the end of 2018.

The objective is to “inform an appropriate policy framework and regulatory regime”, the Bank said in a statement.

The review will address regulatory issues such as clearing and settlement risks, exchange control, monetary policy and financial stability, and cybersecurity, it said.

“Through collaboration with other regulatory bodies, matters such as tax implications, consumer and investor protection, and money laundering activities will also be addressed.”

The review will be carried out by the Bank’s recently established financial technology (fintech) unit. The review of cryptocurrencies will a big focus area for the unit, it said.

The unit will then investigate and decide on the “applicability of innovation facilitators” for the Bank. “‘Innovation facilitators’ is a collective term for innovation hubs, regulatory sandboxes and accelerators. The Bank hopes to have concluded its assessment of the appropriateness of innovation facilitators by the third quarter of 2018. Clear and transparent eligibility and participation criteria will be developed to assist in the consideration of applicants into a regulatory sandbox.”

A third objective is to launch Project Khokha, which will experiment with distributed ledger technologies (DLTs). “The aim of this project is to gain a practical understanding of DLTs through the development of a proof of concept in collaboration with the banking industry,” it said.

Proof of concept

“The objective of the proof of concept is to replicate inter-bank clearing and settlement on a DLT, which will allow the Bank and industry to jointly assess the potential benefits and risks of DLTs. The proof of concept involves the processing of wholesale payments using Quorum, an ethereum enterprise DLT. The Bank is aware of multiple DLTs being experimented with globally.”

ConsenSys, a global expert on Quorum, has been selected as the technology partner to assist the Bank in the design, setup of infrastructure and running of the proof of concept.

“This does not imply a radical move to DLT for the country’s national payments infrastructure, but rather a structured approach to understand the implication of using a tokenised asset on DLT technology to transfer value,” it emphasised. “A public report will be released to explain all the findings, risks and benefits of the associated project during the second quarter of 2018.”

All three initiatives will help the Bank in the formulation of policy frameworks for the possible regulation of fintech, it said. — © 2018 NewsCentral Media

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