Private capital flows to South Africa surged by 825% in 2004 to $5,312-billion from $574-million in 2003, according to data supplied by the Washington-based Institute of International Finance (IIF), an association of the world’s banks and financial institutions.
The surge in private capital flows more than offset the current account deficit with the result that South Africa had a sixth consecutive annual balance of payments surplus.
This meant that the rand continued its recovery after reaching a record worst level of R13,86 per dollar, R20,0866 per pound and R12,4790 per euro in December 2001.
The average last year was R6,45 per dollar, compared with R7,55 in 2003 and R10,51 in 2002. The average so far this year is R5,98.
The IIF is forecasting further rand strength with the real effective exchange rate reaching 117,6 this year from an estimated 106,4 last year and only 74,5 in 2002.
This further strengthening is based on an increase in net private capital flows into South Africa of $6,855-billion this year. Gross domestic product growth is expected to be 4,5% this year from an estimated 3,9% last year.
Private capital flows to emerging markets rose by 32% in 2004 to $279-billion. The IIF said flows to emerging markets in 2004 represented the highest level since 1997 and a doubling since 2002.
Africa was the fastest-growing recipient, almost tripling to $9,232-billion from $3,525-billion in 2003. South Africa absorbed 57,5% of flows to Africa last year from only 16,3% in 2003.
Emerging Europe, which includes Russia and Turkey, saw a 49% rise to $97,4-billion.
Asia Pacific saw a 26% increase to $146,3-billion, but flows into Latin America grew by only 3,5% to $26,1-billion. — I-Net Bridge