In the subsequent eight months, that is from May to December 1998, they reduced their investments in these bonds by R26 billion, to become net disinvestors of R10 billion for the year as a whole. These volatile capital flows had serious implications for the South African financial markets.
The exchange rate of the rand depreciated by about 20 per cent; liquidity was drained from the domestic banking sector; interest rates rose to extremely high levels, and the rate of inflation increased from 5 per cent in April 1998 to 9.4 per cent in December 1998.