Lesetja Kganyago: speeches

1. Why payments matter

Opening the central bank's 2026 payments conference, the Governor of the South African Reserve Bank described payments as basic economic infrastructure, comparable to power, rail and ports: unnoticed when they work, damaging when they are slow or expensive. South Africa wants to catch up with peers such as Brazil, the Philippines and India, whose systems modernised faster. He set out four domestic projects and one regional one.

2. Letting non-banks in

Today any firm that wants to reach the payment system must go through a bank. He argued that payment firms do not borrow short and lend long, the activity that justifies strict bank rules, so they need not be regulated like banks. A proposed exemption notice and authorisation framework would give supervised non-banks a direct route for specific payment activities, with rules on governance, protection of client money, operational resilience and reporting. The guiding idea is equal treatment for equal activities and risks, without shielding incumbents from competition.

3. PayShap's limited reach

The instant low-value payment service launched in 2023 has passed one billion transactions and more than R1 trillion. That remains small: its volumes are a fraction of card and electronic transfer volumes, and a 2023 survey found that cash still dominated everyday payments. Four obstacles hold it back: uneven limits and features across banks, unclear pricing, low public awareness and too few merchants accepting it. He also warned that large closed payment networks should face stronger duties to connect as they grow.

4. Inclusion tools

A single interoperable QR code, QR+, would let small traders accept digital payments without costly terminals; a pilot is about to start. A reusable digital identity for payments, held in a wallet the customer controls, would cut repeated onboarding checks. Payment histories could also help informal firms show their activity and obtain credit, provided customers keep control of their data, records can be corrected and basic services never require consent to unrelated uses.

5. Regional payments and timetable

Cross-border payments in southern Africa remain slow and costly, an issue South Africa pushed during its G20 presidency. Retail transfers below R100,000 are due to move to the TCIB regional system by April 2027, with a hub linking eight pilot countries by October 2027. The authorisation framework should be published by November 2026 and QR+ piloted in early 2027. The central bank will set direction, regulate in proportion to risk and run settlement; the industry is expected to invest and compete.

1. A disaster as a metaphor

Addressing a forum on Africa and geopolitics, South Africa's central bank governor opened with the glacier-driven flood that killed thousands in Nepal in August 2026. Dams in the valley had been designed for floods twenty times smaller than the one that came. He used the event as an image of a world where dangers build up quietly until a cascade of crises overwhelms ordinary precautions, and he listed five sources of danger.

2. Climate and geopolitics

August 2026 tied the record for the hottest month, and current policies point to warming of about 2.6°C by 2100, well beyond the 1.5°C goal. For central banks this means more supply shocks, bursts of food inflation and insurance gaps that threaten financial stability. Geopolitics adds to the strain: disputes over Greenland and a tariff conflict pitting Canada against the United States, a fifth year of war in Ukraine with attacks on Black Sea grain routes and refineries, and an intensifying Middle East conflict that keeps oil near $100 and Saudi output at a thirty-year low. Supply disturbances, rather than demand, now drive the global cycle.

3. Imbalances, AI and debt

Large trade imbalances have returned, with China's surplus under criticism, and history suggests they end abruptly and painfully, yet the trust needed for an IMF-led adjustment is missing. Artificial intelligence has advanced fast, with recent incidents of AI agents escaping controls and breaking into systems; he sees cyberattacks as a plausible trigger for the next financial crisis, alongside asset bubbles. Imagine, he said, a swarm of tireless automated agents breaking into the national payment system or a large financial firm. Public and private debt keep rising, long-term yields in rich countries are at multi-decade highs, the safety premium on US debt has faded, reserve managers are diversifying into gold and other currencies, and leveraged investors such as hedge funds increasingly set bond prices.

4. Fiscal dominance and central bank courage

Many economists fear fiscal dominance, where a central bank tolerates inflation to ease the government's debt burden. He accepted the concern but rejected fatalism: central banking was never easy for South Africa, through the 2001 rand crisis, 2008, the 2013 taper tantrum, attacks on its independence and COVID-19. South African debt has roughly tripled since 2008 and interest absorbs about 5.3% of GDP, more than in the United States, Britain or France, yet he argued this calls for independence and courage, not surrender. Since inflation is poorly understood by the public and can be created quietly, central banks must make it the hardest option so that better fiscal choices win.

5. South Africa's position

Inflation has been above the 3% target for about six months because of the war-driven energy shock, compared with more than five years of misses in the United States. The bank tightened policy and expects to return to target around the end of 2027. Public debt appears to have peaked in 2025/26, which has kept long-term yields near 9% and the rand stable while bond yields jumped elsewhere. Growth remains the weak point: about 0.6% a year over the past decade, with potential output now estimated around double that. The end of power cuts has been offset by the war and by electricity prices that doubled since 2020.

6. Conclusion

The world is more dangerous and less governed than before, though growth and trade continue. South Africa, distant from conflict zones, young and rich in resources, has a better macroeconomic position than before, but it must recognise its new situation and act on its strengths, as little outside help is likely.

1. From saving the world to resilience

Speaking at the University of South Africa, Governor Lesetja Kganyago began with a 1999 Time cover showing three Americans as a committee to save the world, when emerging markets lurched from the Tequila crisis to Asia and Russia (output down 10-13% in the worst-hit Asian economies, currencies losing half their value or more, South Africa's prime rate peaking at 25.5% and its reserves exhausted defending the rand). That view of emerging markets as fragile and dependent on Washington has passed its expiry date: the 2007-09 crisis began in the US, while a core group, among them Mexico, Brazil, Thailand, India, Indonesia and his own country, has gone decades without defaults, IMF bailouts or currency collapses, thanks to home-grown reform.

2. How resilience was built

The 1990s fault line was weak monetary credibility, with dollar pegs, foreign-currency borrowing and lax supervision. The fixes were independent, inflation-targeting central banks with floating exchange rates and a clear purpose; large foreign-exchange reserves; and better financial supervision to limit private over-borrowing, a story history repeats from railways to Latin America. Capital-flow measures, despite the debate, mattered little. Fiscal policy remains the unsolved problem: unlike monetary policy it lacks a reliable rule, and today rich countries' debts look the least sustainable. Resilience is also not growth: emerging economies rose from about 40% to over 60% of world output, but mostly through Asia.

3. South Africa: strength and a silent crisis

South Africa fits the pattern: an independent central bank since 1996, a floating rand after 1998, inflation targeting since 2000, an inflation gap with the US that shrank from 10 points to under 1, reserves of about 74 billion dollars and no systemic financial event. Its weak spot is debt, which climbed from below 30% to close to 80% of output, cost it investment-grade ratings and now absorbs a fifth of tax revenue; but debt is stabilising, helped by a primary surplus run out of prudence, and long-run borrowing costs have fallen by about 300 basis points. Growth is the silent crisis, with living standards below the early 2010s. He rejects blaming macro policy and points instead to state capture, failing municipalities and state firms, a private sector in survival mode, and slow reform despite Operation Vulindlela.

4. The choice

He asks whether the country truly wants growth, citing Pritchett's call to simply go for it and Dercon's gambling on development: South Africans are risk-shy, protect incumbents and love detailed rules, and should bet on growth rather than sport. The country, he concludes, is resilient but not yet flourishing.

1. A lower inflation target

At the Reserve Bank's annual general meeting, marking its 105th year, Governor Lesetja Kganyago said the biggest step since the last meeting was reforming the inflation target after 25 years: from a 3-6% range, aimed at 4.5% since 2017, to 3% plus or minus one point from 2025, in line with peers. An oil shock pushed headline inflation up to 4.5% in May, then 5% a month later, and the bank raised rates to 7% in May, then held in July; before the shock its model pointed to about 6%. He gives no promises on the rate path, but says lower inflation brings lower rates, and long bond yields near pre-war levels show markets expect the shock to pass.

2. International and technology issues

South Africa has left the FATF grey list after major investment and awaits the next evaluation; it was not invited to this year's G20 despite hosting earlier. On AI and stablecoins he sees both opportunity and threat, defends common crypto rules within the country's capital-flow controls so the playing field is level, and says payments modernisation without tokenisation can still deliver cheaper, faster payments, with a 50% stake in BankservAfrica bought and rebranded PayInc.

3. A strong balance sheet

Reserves rose from 47 billion dollars ten years ago to 74 billion, profits have rebuilt capital, and he credits well-governed institutions and staff.

1. A turbulent world

Addressing the heads of foreign missions at the Reserve Bank, Governor Lesetja Kganyago noted that since the last such dinner in 2019 the world has seen a pandemic, the Ukrainian and Middle Eastern wars, a major inflation surge and an AI boom, yet his 2019 worries, eroding multilateralism and pressure on central bank autonomy, remain. The global economy has proved resilient thanks to the AI-driven investment boom, loose fiscal policy, continued openness to trade without a retaliatory tariff spiral, and emerging markets, which grow near 4% and now make up over 60% of world output.

2. South Africa's re-rating

South Africa has had rating upgrades from Fitch and S&P, left the FATF grey list, seen six straight quarters of growth, ended load-shedding, and is expected to stabilise public debt this year, with long-term yields down over 300 basis points. The new 3% inflation target replaces the 3-6% range, though a supply shock forced a May rate rise and survey expectations rose even at long horizons, a reminder of why the bank acted to avoid getting stuck above target. The real economy has yet to show the gains, but he expects growth to return after fifteen lost years, and urged trust and multilateralism.

1. Four lessons from a career

Speaking to a youth leadership summit, Governor Lesetja Kganyago said policy decisions that shape lives are made in rooms young people never see, and he drew on four experiences. Treasury's case for expanding HIV treatment was first rejected, then, after a joint task-team report, the government launched the world's largest treatment programme. The Gauteng e-toll proposal, backed by analysis and feasibility work, met fierce opposition, and he disagreed with a respected priest, showing that leadership sometimes means saying no even to people one admires. The Public Protector's report threatened the Reserve Bank's mandate and independence, so he took it on review, rallied staff and prevailed. The new 3% inflation target was opposed on procedure after critics could not fight the analysis, and was won through explanation, credible research, legal mandate and a long relationship with the Finance Minister.

2. Leading under uncertainty, with sound analysis

Policy leadership means deciding when answers are incomplete: ask what problem is being solved, what evidence exists and what is unknown, and neither wait for certainty nor act carelessly. Good analysis starts by clarifying the problem, uses data that is questioned and put in context, keeps assumptions realistic, such as spending multipliers that ignore fiscal constraints, or the claim that tolerating higher inflation is costless when lenders charge more for expected inflation, weighs trade-offs, as with the green transition's costs to coal, and is honest about uncertainty.

3. Independence, credibility and humility

Leaders must withstand pressure and resist shaping analysis to please political principals. History shows the cost of lost independence: in the 1970s Arthur Burns's Fed loosened under political pressure, producing high inflation and low credibility, in an era of secrecy. Trust is built slowly and lost fast, and protecting the institution's credibility for tomorrow is part of the job, which is why central banking moved towards independence, transparency and accountability. Finally, collaboration and humility matter: he wants considered disagreement from his staff, seeks challenge, and advises young people to surround themselves with people who think differently. His closing point: real leadership has little to do with rank, assurance or applause; it means deciding wisely amid doubt, disciplining oneself with facts and holding firm to principle when pressed, while sturdy institutions come from people who reason carefully and behave honestly.

1. A museum to explain the central bank

At the opening of the renovated Reserve Bank campus and its new museum, in the presence of President Ramaphosa, Governor Lesetja Kganyago said the aim is to open the institution to the public as it nears its 105th anniversary. Central banks can seem distant, and trust grows when people understand how institutions work, so the museum should explain the bank's role and dispel myths: that prisoners counted the money, that notes are printed abroad, that gold bars are hidden in the building. It is also a keeper of memory, with exhibits tracing the region's economic history from barter through colonialism and apartheid to democracy, objects dating back 75 000 years, three centuries of coins and a working 134-year-old minting press. School visits and the monetary policy schools challenge aim to inspire future central bankers, and a game lets visitors set the rate.

2. Art, location and renovation

The museum shows the bank's art collection of more than 1 200 works to the public for the first time, in rotating shows including one on everyday workers and one on women artists. He thanked staff and partner museums. The bank chose to stay in Tshwane, within sight of the Union Buildings and close to the Treasury, as a practical and symbolic commitment to renewing the inner city. It is the first major renovation of the head office in over forty years.

3. Commemorative coins

He announced a series of circulating commemorative R2 coins on education: one for the 1976 youth uprising, one for the 125th anniversary of Charlotte Maxeke's degree, due in August, and one for the thirtieth anniversary of the Constitution, due in December with an R5 coin combining the three themes. Through the museum the bank hopes to strengthen accountability so that even unpopular decisions are debated within its constitutional mandate.

1. From hope to a rate rise

At the annual conference of the Bureau for Economic Research, South Africa's central bank governor joked that uncertainty has fallen only because things are now more certainly worse. In March the bank held rates, hoping the Gulf conflict would be brief and Hormuz would reopen. That hope faded: few ships pass, infrastructure is damaged, stocks are depleted and oil prices will not quickly return to February levels. Food prices also look worse because of fertiliser shortages and costly diesel, some farmers doubt planting is worthwhile, and El Niño may bring drought. The committee therefore raised the repo rate from 6.75% to 7%.

2. Why respond to a supply shock

Critics say rates cannot fix oil prices or droughts, while textbooks present monetary policy as demand management. Neither view is right for a small open economy. In 2022 emerging markets tightened early while some advanced economies argued for looking through the shock, and the transitory camp lost. Rates cannot stop the first price jump, but inflation can stay high afterwards if people come to see it as normal, and preventing that is the central bank's task. Because policy acts with delays, waiting for full proof of second-round effects means acting too late.

3. First round or second round?

Fuel price rises are clearly a first-round effect, but higher taxi fares, delivery costs or wage claims to cover commuting blur the line. A more useful test is whether prices are shifting relative to each other, which is how an economy adapts to scarcer oil, or whether the general price level is rising, prompting everyone to raise wages and prices so that inflation feeds itself. Expectations therefore matter most. A promise of price stability abandoned whenever it becomes uncomfortable is not credible, which is why clear targets, transparency and independence underpin inflation targeting.

4. Lessons of the Great Inflation

The oil shocks of 1973 and 1979 became a lasting inflation disaster mainly because of weak policy responses; the Bundesbank and the Swiss National Bank avoided it and kept inflation near 3%. In 2008 a prominent economist predicted inflation targeting would fail under high oil and food prices, yet none of the 23 countries using it dropped the framework. Inflation targeting is in fact designed to handle supply shocks by anchoring expectations. With a new wave of shocks this decade and fresh memories of high inflation, credibility must be guarded.

5. Holding the new 3% target

The bank projects core inflation near 4% in early 2027. Higher rates support the rand and therefore import prices, and they tell firms that raising prices in strong demand will cost them customers, so that the burden does not fall on the old and poor. He ruled out returning to the 3-6% range, calling the 2002 retreat a major mistake. Inflation is expected at 4.4% this year and 3% by 2028, below what the old 4.5% goal implied. Auction yields remain about 150 basis points below early 2025, the spread over US Treasuries is the narrowest since 2013, and rating agencies have improved their outlooks. Further moves will be decided meeting by meeting, but the goal is a return to 3%.