ContextAddress by Lesetja Kganyago, Governor of the South African Reserve Bank, at the Forum on Africa and Geopolitics, hosted by the Mapungubwe Institute for Strategic Reflection (MISTRA), Pretoria, 28 September 2026.
Why it mattersGroups climate, imbalances, AI, debt and fiscal dominance as five pressures that test monetary policy in a more disordered world.
- Climate change and global imbalances are building up like a slow-moving disaster.
- Rapid technological change, chiefly AI, and heavy debt add to fragility.
- Fiscal dominance threatens the independence of monetary policy.
- Prepare early for gradual risks instead of waiting for a catastrophe.
- Keep public debt sustainable and fiscal policy credible.
- Protect central bank independence and its focus on price stability.
Read the speech summary
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.