Speaking at an investment conference on Wednesday, the apex bank’s governor Lesetja Kganyago said supply shocks linked to conflict in the Middle East could push inflation higher while weighing on economic activity in Africa’s most industrialised economy.
“It is not desirable to put the economy under more pressure, but we need to keep our options open,” Kganyago said.
South Africa’s headline inflation rate rose slightly to 3.1% in April from 3.0% in March, according to official data, as higher fuel costs started feeding into the economy.
The country is a net importer of oil, making it vulnerable to swings in global energy prices.
Kganyago said geopolitical risks had become more important for policymakers as wars and conflicts continue to disrupt global fuel and food markets.
He said the South African Reserve Bank could not directly influence global oil prices, but it could act to keep inflation expectations under control and ensure inflation returns to target after external shocks ease.
“Success lies not in preventing higher inflation right now, but in getting back to target after the shock has passed,” he said.
The South African Reserve Bank has kept its benchmark lending rate unchanged at 6.75% at its last two policy meetings. The central bank’s next interest rate decision is scheduled for later this month.
Kganyago said inflation had continued to trend lower overall, although expectations were still not fully anchored at the central bank’s preferred 3% target. South Africa officially targets inflation within a 3% to 6% range.
The governor also said South Africa had made progress in stabilising its fiscal position after years of rising debt and weak public finances.
“In South Africa we are not in denial,” Kganyago said, adding that authorities were pursuing economic adjustments “with determination”.
He also warned about rising debt levels globally and weakening international policy coordination, saying many economies were facing growing fiscal pressures amid increased defence spending and slower growth.
Despite global uncertainty, Kganyago said the rand had remained relatively resilient this year, recovering after initial weakness linked to Middle East tensions.
His comments highlight the growing challenge facing central banks across emerging markets as policymakers try to balance inflation risks against already weak economic growth.
For many African economies that rely heavily on imported fuel and food, prolonged geopolitical tensions could add further pressure on consumer prices and public finances.
