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Enoch Godongwana denies SA abstention in UN vote over Russia will affect country’s ability to raise funds in global markets

The UN General Assembly holding one of its annual sessions. Picture: Reuters/Eduardo Munoz

The UN General Assembly holding one of its annual sessions. Picture: Reuters/Eduardo Munoz

Published Mar 25, 2022

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Cape Town - Finance Minister Enoch Godongwana has denied that South Africa’s decision to abstain in the UN General Assembly vote to condemn Russia’s invasion of Ukraine, will have an impact on its ability to raise funds in the global markets.

Godongwana said the situation in Ukraine would not have that bearing on South Africa.

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He said the country’s ability to raise funds in the global markets was influenced by other factors and not its vote in the UN General Assembly.

The vote took place in the UN a few weeks ago.

Godongwana, who was replying to a written question in Parliament from the DA, said investors have been attracted to the local economy by many other factors.

However, the country’s decision to abstain in the world governing body vote would not have an impact on investments and raising funds in the global markets.

“The sovereign’s ability to raise funding from global markets is not impacted by South Africa’s abstention on the vote for condemning the invasion of Ukraine. It is important to note that the geopolitical risks emanating from the conflict between Russia and Ukraine and the recently imposed sanctions have resulted in uncertainty and volatility in the global financial market,” Godongwana said.

“Global investors are drawn to South African government paper due to its reliability as a high yield debt market. This has been elevated by the precarious positions of our traditional competitors in the market, namely Russia and Turkey, whose bonds have become riskier, thus driving investors to purchase South African bonds.

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“Additional risks to the foreign issuance strategy includes global inflation expectations and the impact on the direction and speed of US interest rate hikes and tapering. The Federal Reserve policy of unwinding the massive purchases of Treasury bonds, of which may result in larger risk premiums.

“However, the timing of accessing the market becomes the primary factor which will determine the cost of borrowing. For these reasons, the government will only access the global markets as and when conditions are suitable,” he said.

President Cyril Ramaphosa and his Cabinet ministers have been calling for a peaceful resolution to the conflict between Russia and Ukraine.

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Ramaphosa has said he has spoken to Russian leader Vladimir Putin and the president of China, Xi Jinping, who have both expressed a desire for a solution to the conflict.

The government has also denied sitting on the fence on the matter saying it encouraged both sides to reach a negotiated settlement.

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