ContextAddress by Lesetja Kganyago, Governor of the South African Reserve Bank, at the Principal and Vice-Chancellor Public Lecture and Leadership Engagement, University of South Africa, Pretoria 4 August 2026.
Why it mattersA useful history lesson from South Africa's Governor on how emerging markets moved from repeated crises to more resilience, and what is still missing.
- Emerging markets suffered repeated crises in the 1990s.
- South Africa's public debt grew sharply after the 2008 crisis.
- Weak network industries like rail and ports hold back growth.
- Give central banks a single clear priority: inflation targeting.
- Build large reserves and better financial supervision.
- Stabilise public debt and accept risk-taking reforms to boost growth.
Read the speech summary
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.