The picture above shows how SA banks have increasingly relied on foreign currency and foreign sector funding in the last year. (The increase is significantly larger in Rand terms due to the recent rand depreciation). I don’t know the reason for the increase, but research from the US suggests that such borrowing is a consequence of banks extending new loans at a faster rate than their deposits increase. In such circumstances the bank must borrow from domestic money markets, or from international markets to fund their lending (ie, they become increasingly market based). This is a sign that SA banks are eager to lend, whilst the supply of savings in South Africa is lacking.
About half of the rapid increase was retraced in the second quarter of 2013. The question now is whether this reversal will continue, or will these liabilities return to levels seen in the first quarter? If the foreign liabilities remain high, it suggests an increased demand for credit which is generally considered to be a bullish sign for the SA economy. That said, rapid increases in foreign liabilities have been a leading indicator of past financial crises in emerging markets. So, no matter how you interpret it, this will be an important indicator to follow in the coming months!