The rate of growth of South Africa's broad M3 money supply measure rose by 15.09% in the year to end-February from a
revised 12.19% (12.29%) in the year to end-January, the South African Reserve Bank (SARB) says.

Credit extension to the private sector (PSCE) grew at a rate of 8.31% y/y in February from a revised 10.50% y/y (10.74%) in January. According to the new definition, which excludes loans made to provincial governments, credit extension growth was at 8.53% y/y from January's revised 10.43% y/y.

South Africa's total domestic credit extension rose to a growth rate of 8.36% y/y in February from a revised 10.07% y/y in January.
The SARB also indicated that its net open position in foreign currency (NOFP) rose to US$4.650 billion at the end of February from $3.962 billion at end January.

The M3 measure of money supply growth was expected to have risen to a 12-month growth rate of 13.5% y/y in February, according to the median forecast of private sector economists surveyed by I-Net Bridge.

At the same time, February private sector credit extension (PSCE) was forecast to have risen to 11.2% y/y.
The range of economists' expectations for M3 was from 11.4% y/y to 15.6% y/y, while that for PSCE was between 9.2% y/y and 13.2% y/y.

The major uncertainty was how the semi-annual bond coupon payments by government and the redemption of bonds at the end of February, which together involved some 40 billion rand, impacted on the money supply aggregates.

The SARB undertook a major revision of the M3 for inclusion in the Quarterly Bulletin issued on March 24.

South Africa's M3 measure of money supply growth has been revised to a 12.29% y/y increase in December 2003 from a previously reported 8.40% y/y increase as the South African Reserve Bank (SARB) has now includednegotiable
promissory notes (NPN) in the definition of M3.

The monetary aggregates, particularly M2 and M3, have now been revised back to December 2001 to include negotiable promissory notes. In December 2003, the difference between the revised and original M2 and M3 aggregates were 50.3
billion rand and 59.5 billion rand respectively or 7.6% and 8.2% of the original aggregates.

The monetary aggregates have always included negotiable certificates of deposit (NCD), but excluded promissory notes.
In the recent past, negotiable promissory notes have gained considerably in importance and have emerged as an extremely close substitute for NCDs.

The popularity of promissory notes was enhanced by the repeal of stamp duty on such notes in 2003.
South Africa's record y/y growth rate for M3 money supply was 29.34% y/y in April 1981, while the record y/y growth rate for PSCE was set in July 1981at 35.88%, when South Africa was experiencing a gold boom and real interest rates
were very low.

The PSCE data is being skewed by recent revisions to banks' reporting requirements for derivatives, which has in particular made the investment component of PSCE very volatile.

The so-called AC133 accounting standard now makes it compulsory for commercial banks to report their gross derivative position, rather than the net position, which was the norm before December 2002.

I-Net Bridge