South African Reserve Bank governor Lesetja Kganyago. Photo: Waldo Swiegers/Bloomberg/Getty Images
As we wait in anticipation for the outcomes of the third monetary policy committee (MPC) meeting of 2025 on 29 May, and inflation data reflecting a positive trend, will the South African Reserve Bank consider prioritising economic growth when pulling the rate ladder in 2025.
The Reserve Bank is often praised for its role in achieving price stability, but far less attention is given to its forgotten second mandate: supporting balanced and sustainable economic growth. In a country where unemployment remains stubbornly high at 32.1%, this secondary obligation demands renewed scrutiny.
Section 224 of the Constitution states the mandate of the central bank is to “protect the value of the currency in the interest of balanced and sustainable economic growth in the Republic”.
Although the Reserve Bank has largely been successful in protecting the value of the rand, it has been less so active in driving economic growth.
It continues to focus firmly on maintaining inflation within its 3% to 6% target band, even as broader economic conditions deteriorate. It operates a freely floating exchange rate regime, stepping in only to curb excessive volatility rather than to guide the rand toward any competitive level.
Although the MPC has begun to acknowledge the employment crisis more openly since the 2021 Amendment Bill discussions, there remains no formal commitment to targeting employment or the exchange rate directly. The Reserve Bank implemented several key amendments, particularly regarding exchange control regulations and financial stability. These included relaxing loop structure restrictions for South African tax residents, establishing the central bank as the resolution authority and introducing amendments to the Currency and Exchanges Manual.
The March 2025 Statement of the Monetary Policy Committee reflects a cautious
continuation of this approach. While the Reserve Bank acknowledges extreme global uncertainty, including weaker US growth prospects and volatile commodity markets, it maintained the policy rate unchanged at 7.5%. It also notes marginally lower inflation
forecasts for 2025 as a result of lower oil prices, although it warned that risks to the inflation outlook remain skewed to the upside.
Despite these more favourable inflation dynamics, growth for 2025 has been revised down slightly to 1.7%, with the risks to growth assessed as being firmly to the downside.
The MPC also explored external scenarios such as the potential loss of African Growth and Opportunity Act benefits and global trade disruptions. In its downside scenarios, the Reserve Bank recognised the potential effect of weaker exports, a depreciated rand, higher domestic inflation, and lower growth.
Despite acknowledging employment and growth risks, the focus of policy remained firmly on inflation expectations and maintaining cautious interest rate settings, with little reference to active support for employment outcomes.
The Reserve Bank maintains that unemployment is primarily structural, driven by energy insecurity, skill mismatches and rigid labour markets, and thus beyond the remit of monetary policy.
But such a stance overlooks how monetary decisions, particularly regarding the exchange rate and real interest rates, interact with these structural weaknesses. Rapid rand appreciation, often unrelated to productivity fundamentals, severely harms labour-intensive sectors such as mining and agriculture, while capital-intensive industries remain relatively insulated.
Productivity growth itself has become increasingly concentrated in a few capital-rich
industries, leaving low-skilled workers behind. The Reserve Bank almost certainly understands the rough boundaries of a competitive, employment-supportive exchange rate. Yet, without an explicit operational mandate to act, it remains limited to inflation forecasting and short-term currency stabilisation.
Even if it wanted to intervene more aggressively, South Africa’s foreign exchange reserves, standing at about $60 billion, would constrain any sustained effort.
A more realistic approach would be for the Reserve Bank to integrate employment outcomes more formally into its decision-making. Just as inflation forecasts anchor monetary policy today, labour market forecasts should be treated as essential inputs.
Greater coordination with fiscal authorities would allow for more nuanced responses, safeguarding vulnerable sectors without abandoning the Reserve Bank’s core inflation-targeting credibility.
Reviving the central bank’s economic growth mandate is not about compromising price stability. It is about recognising that lasting macroeconomic credibility depends on building an inclusive, resilient economy. In a country where exclusion is already dangerously entrenched, ignoring employment risks turns monetary policy into an exercise in managing symptoms rather than curing the underlying disease.
Cairo Mathebula is a political commentator. Her work primarily focuses on inter-African trade and economic policy. Neo Mosala is an analyst, writer, and Allan Gray Orbis Foundation fellow and is completing her master of management in finance and investment.