Weekly Wrap –23 February 2024


  • Treasury taps into GFECRA
  • FOMC minutes show there is no urgency to cut US rates
  • Nvidia shoots the lights out
  • Oil steady, gold climbs

After months of speculation, South African Finance Minister, Enoch Godongwana, unveiled Treasury’s plan to access South Africa’s Gold and Foreign Exchange Contingency Reserve Account (GFECRA) held at the South African Reserve Bank (SARB). The goal? To cut government borrowing and lighten the burden of debt-servicing costs, all while hoping to keep the economy on a steady course.

Picture this: a reserve account swelling with valuation gains on South Africa’s foreign exchange reserves, thanks to the rand’s rollercoaster ride from R10.00/$ in 2014 to a whopping R19.00/$ today. As the numbers skyrocketed, so did the GFECRA balance, ballooning from a modest R1.8 billion in March 2006 to a staggering R507.3 billion in January 2024. It’s the kind of financial plot twist that keeps economists on the edge of their seats.

In the past, these gains and losses were merely numbers on a balance sheet, reflected as assets or liabilities without ever being settled. But now, Treasury has decided that the GFECRA has become a beast too big to ignore. With its balance eclipsing any potential losses from rand appreciation, the time has come to put those excess funds to work.

Enter the proposed settlement agreement between the National Treasury and the South African Reserve Bank (SARB). The plan? To mobilise the funds, reduce government borrowing by a cool R150 billion, and bolster the SARB’s equity position by a hefty R100 billion. It’s a high-stakes game of financial manoeuvring, with the potential to bring South Africa closer to international norms and ease the burden of debt service costs.

The agreement lays out three distinct “buckets” for the allocated funds. First up, the GFECRA will retain a healthy reserve of over R250 billion to weather the storm of exchange rate swings. Then, a new R100 billion SARB contingency reserve will ensure the bank’s solvency and cover sterilisation costs to counteract interest rate impacts. And finally, the pièce de résistance: R150 billion earmarked for National Treasury to chip away at the government’s borrowing requirement.

It’s a plan that’s been meticulously crafted, with input from Treasury, the SARB, and international experts alike. The aim is to ensure the SARB’s solvency remains intact, to prevent any negative equity woes, and to, hopefully, maintain transparency every step of the way. After all, after years of government looting, transparency is key.

But not everyone is cheering from the sidelines. Opposition parties have raised concerns about the government’s raid on the SARB reserves, labelling it a desperate move in the face of fiscal constraints. Critics warn of inflationary pressures, credibility challenges, and the spectre of fiscal irresponsibility looming on the horizon.

Yet, amidst the chorus of dissent, some voices offer cautious optimism. The decision to tap into reserves is seen as a crisis strategy, a calculated move to stave off austerity measures and keep the economy afloat in troubled waters. It’s a reminder that in the world of finance, sometimes the most unconventional solutions yield the greatest rewards.

As the dust settles and the ink dries on the proposed agreement, one thing is clear: the GFECRA saga is only just beginning. With billions at stake and the nation’s economic future hanging in the balance, all eyes are on South Africa, waiting to see how this daring financial escapade unfolds.


The latest insights from the United States (US) Federal Reserve (Fed) are that policymakers are maintaining a cautious stance on reducing interest rates, waiting for clear signs of a sustained downtrend in inflation. The minutes from the recent Federal Open Market Committee (FOMC) indicate a reluctance to implement early rate cuts in March, reflecting concerns about the risks associated with moving too quickly.

In the FOMC meeting, which took place from 30 to 31 January, most officials expressed apprehension about the potential consequences of premature rate cuts. They emphasised the importance of concrete evidence indicating a firm downward trajectory in inflation before considering any adjustments to interest rates. While policymakers acknowledge that borrowing costs may have peaked, the exact timing of the first rate cut remains uncertain. With expectations for early and aggressive rate cuts tempered, traders now anticipate the first cut to only occur in June.

Looking ahead, Fed Chair, Jerome Powell, is set to testify before Congress in early March, providing fresh insights into the economic outlook. The upcoming meeting which will take place from 19 to 20 March, will offer an opportunity for Fed officials to update projections for rates and the economy.

Despite some members highlighting the potential risks of delaying rate cuts, the majority of the FOMC members underscored the importance of evaluating incoming data thoroughly. The focus remains on ensuring that inflation steadily moves toward the 2% target. Only then will the Fed consider any adjustments to monetary policy.

Overall, the Fed’s cautious approach reflects a balance between addressing US inflation concerns and supporting economic growth. While uncertainties persist, policymakers are committed to a data-driven approach in navigating the complex economic landscape. However, as policymakers navigate inflation risks and economic uncertainties, markets will await further clarity from upcoming meetings and testimonies, shaping expectations for the future trajectory of interest rates.


US stocks surged on Thursday, with the S&P 500 seeing a remarkable 1.2% leap to reach a new record high. The Nasdaq followed suit, jumping 1.9%, while the Dow Jones gained roughly 240 points, all thanks to Nvidia’s stellar performance. The semiconductor giant’s shares skyrocketed over 11%, to hit an unprecedented $750.26-high after reporting record-breaking revenue and issuing bullish forecasts. This robust demand underscores expectations for the ongoing AI-driven rally. Mega-cap tech stocks mirrored the enthusiasm, with Microsoft, Amazon, and Meta among the gainers. Other semi-conductor stocks, Advanced Micro Devices and Micron also saw sharp upticks. Despite a hawkish Fed stance, traders seemed unfazed by the delay in rate cuts, focusing instead on positive economic indicators. S&P Global PMIs (purchasing mangers’ index) and unexpected drops in US initial jobless claims further buoyed market sentiment.

In Europe, Frankfurt’s DAX 40 surged over 1%, propelled by tech shares following Nvidia’s promising revenue projections. However, not all news was rosy. Vehicle manufacturer, Mercedes-Benz Group raised dividends despite declining sales, while multinational online food delivery company, Delivery Hero, faced a setback with the termination of talks for the sale of its foodpanda  business.

In the UK, the FTSE 100 rebounded, fuelled by upbeat earnings, including a notable 57% profit surge from Lloyds Banking Group. Jet engine manufacturer, Rolls-Royce Holdings, also reported a return to pretax profit.

Asian stocks saw significant gains, with Japan’s Nikkei 225 Index surging 2.19% to surpass a previous all-time high set during the 1989 bubble. Technology stocks, strong domestic profits, and a favourable export outlook fuelled the rally. However, Japan’s private-sector activity showed signs of slowing amid manufacturing contraction.

In South Africa, the JSE All Share index edged higher, riding the wave of global optimism post-Nvidia’s stellar results. Locally, Finance Minister Enoch Godongwana’s budget speech, coupled with US FOMC minutes indicating a cautious approach to rate cuts, shaped market movements. Resource-linked stocks led gains, offsetting minor declines in financials.


Brent Crude futures stabilised around $83/barrel, reflecting a nearly 1% increase from the previous session, fuelled by a positive demand outlook. US refinery outages, including BP’s Indian facility and TotalEnergies’ Texas refinery, contributed to supply constraints. Eyes are now on the US Energy Information Administration’s weekly data, which should provide further market insights. In the geopolitical arena, concerns persist over the timing of a ceasefire in Gaza and ongoing Houthi assaults on Red Sea shipping, which are helping to maintain a risk premium on oil prices. Additionally, recent data revealed Iraq’s failure to comply with the Organization of the Petroleum Exporting Countries’ (OPEC’s) output cut in January, adding another layer of uncertainty to the market.

Meanwhile, gold climbed toward $2,030/ounce, extending gains for a sixth consecutive session. The dollar’s weakness, driven by apprehensions about the US interest rate outlook, propelled gold’s ascent. Fed meeting minutes underscored officials’ caution regarding rapid rate cuts, potentially delaying an easing cycle. Traders, having relinquished expectations for rate reductions in March and May, now anticipate a possible 25 basis point cut in June, with odds standing at approximately 53%. Investors eagerly await flash PMI reports for insights into the US private sector’s performance. Furthermore, gold’s allure as a safe-haven asset strengthened amidst escalating tensions in the Middle East, adding to its bullish momentum.


On Thursday, the US Dollar Index dipped slightly below 104 as traders analysed the monetary and economic landscape. The latest FOMC minutes revealed the Fed’s cautious stance on interest rate cuts, while economic indicators painted a mixed picture, with US private sector activity slowing in February, though manufacturing output rebounded.

The euro remained resilient above $1.085/€, buoyed by tempered expectations for European Central Bank rate cuts amidst signs of a slowing eurozone business activity contraction. Sterling strengthened above $1.265/£ following robust UK PMI data, indicating the fastest private sector expansion since May, driven by service sector growth and inflationary pressures.

The South African rand hovered around R19.15/$ at the time of writing, giving up nearly 1.15% during intra-day trade on Thursday, influenced by a slightly stronger dollar following US economic data releases. Locally, SARB Governor, Lesetja Kganyago, emphasised ongoing efforts to manage inflation, while traders digested the finer details of Wednesday’s local budget.

Key Indicators:

USD/ZAR: 19.15

EUR/ZAR: 20.73

GBP/ZAR: 24.26

Gold: $2,026.36

Oil: $83.29

Sources: Bloomberg, Reuters and Trading Economics.

Weekly Wrap content provided by Citadel Pty Ltd.