Lesetja Kganyago’s warning to the world

The global economy is at risk of splintering under US President Donald Trump’s policy onslaught, the South African Reserve Bank Governor warned.

“We are seeing trade fragmentation, we are seeing economic fragmentation, and it just raises the level of uncertainty,” said South African Reserve Bank Governor Lesetja Kganyago on Monday, ahead of a Group of 20 meeting of finance chiefs and central bank governors in Cape Town Wednesday.

The US president has battered financial markets with an array of threatened tariffs on products including steel, aluminum and cars, as well as on specific countries such as China.

“This heightened uncertainty has got implications for global trade and thus has implications for the global economy,” Kganyago said in a Bloomberg interview. “It makes policymaking a big challenge.”

Trump’s also frozen aid to South Africa over false claims about land seizures and US Treasury Secretary Scott Bessent is skipping the G-20 meeting this week.

Secretary of State Marco Rubio did the same at the foreign ministers’ gathering last week in Johannesburg. South Africa currently chairs the G-20, which returns to the US in 2026.

The SARB, which lowered borrowing costs 25 basis points to 7.5% last month, warned at the time that a trade war could unmoor inflation and even push central banks — including in the US — to reverse recent interest-rate cuts. It also argued for policy caution.

“The only thing that a small open economy can do is to strengthen its resilience and build the buffers because this thing would come as a shock,” he said.

Closer to home, Kganyago said a proposed two percentage point hike in South Africa’s value-added tax rate — which last week led to the budget being delayed to March 12 after political backlash — would also have presented a shock.

But what it would have meant for monetary policy would have depended on the impact it had on inflation expectations or other so-called second-round effects.

“Monetary policy responds to those second round effects not to the shock,” he said. The SARB’s next meeting will conclude on March 20.