South Africa is facing multiple risks such as a second wave of COVID-19, rising debt, cyber-attacks and climate change, said South Africa Reserve Bank (SARB) when releasing the 2020 Financial Stability Review on Tuesday.
“There is a risk of the second wave of COVID-19. In the past half a century South Africa has not experienced an economic shock of this nature,” said SARB economist Alex Smith.
He noted that government debt is increasing as a share of the gross domestic product (GDP). “There is a risk of the debt spill over to institutions lending money as a result of the downgrade. Both the financial sector and the economy at large will take years to recover from the costs imposed by the pandemic. Government debt will also be significantly higher than at any time in South Africa’s post World War II history.”
The National Treasury predicted that the debt is expected to peak at 95.3 percent of GDP in 2026.
Smith also pointed out that cyber attacks cases are increasing in recent years. “In the last few months, people are working from home opening more paths for cyber attacks.”
The SARB deputy governor Kuben Naidoo stated that the financial sector remains highly capitalized despite the challenges, adding that banks and the insurance companies are adequately capitalized and above the SARB’s minimum requirement.
The SARB governor Lesetja Kganyago said they are happy with the performances of the banks which showed resilience in the midst of the pandemic. He said the banks went into the pandemic with adequate capital and capital buffers.