South Africa going from crisis to crown jewel

Reserve Bank Governor Lesetja Kganyago said South Africa is in a very good position due to three factors working in the country’s favour.

These three factors are refined monetary policy, an improved fiscal trajectory and ongoing structural reforms.

According to Kganyago, these three factors taken together have boosted South Africa’s potential growth after years of erosion and decline.

Speaking to Bloomberg Television during the World Economic Forum (WEF), currently taking place in Davos, Switzerland, Kganyago explained that South Africa is in a “very good space” due to three important factors.

Firstly, he highlighted the monetary policy reform that has been implemented over the past few years, specifically noting the Reserve Bank’s new inflation target.

In November 2025, Finance Minister Enoch Godongwana officially changed the Reserve Bank’s inflation target from a range of 3% to 6% to a lower, narrower target of 3%, with a 1% tolerance band on each side.

This change has brought South Africa more in line with its peers and is also underpinned by a new monetary policy implementation framework.

Momentum Investments economists Sanisha Packirisamy and Tshiamo Masike have explained that, in time, the lower inflation target should bring immense benefits to the economy.

The lower target is set to allow for less volatile inflation, improved purchasing power, increased housing affordability, a less stringent funding environment for corporates, and lower government borrowing costs.

Secondly, Kganyago said South Africa is achieving something that African countries have been promising for years – fiscal consolidation.

He explained that, after years of these promises, investors have adopted a “wait-and-see” attitude towards many African countries, including South Africa. 

However, Kganyago said South Africa can now show evidence that its fiscal consolidation efforts are bearing fruit.

Over the past three years, the National Treasury has reported a primary budget surplus, which will allow South Africa’s debt-to-GDP ratio to peak at the end of this fiscal year and start to decline in the coming years.

Reforms paying off

The third and, according to Kganyago, most important factor counting in South Africa’s favour is the country’s ongoing reform efforts.

The governor specifically highlighted the progress South Africa has made in terms of energy, transport and logistics, and the country’s visa regime.

In an interview with Newzroom Afrika on the sidelines of the WEF, Kganyago said the National Treasury is reprioritising and allocating funds towards more growth-friendly expenditure.

This includes the creation of an infrastructure fund and the launch of an infrastructure bond.

Overall, Kganyago explained that all three of these factors have put South Africa on a very sound economic footing.

The Reserve Bank expects these factors to boost South Africa’s economic growth to 1.4% in 2026. While still modest growth, he said it is double the growth of previous years. 

“When you go through the kind of reforms that we have had to go through, you will expect that that growth will be pretty modest,” he told Bloomberg TV. 

“I think that, importantly, we had a long period where the growth potential of South Africa had been eroded, and we have rebuilt that.” 

“From here now, we think we have built a basis on which growth can be higher.”

Over the past decade, South Africa’s growth has averaged around 1% per year, which is considered far too low to achieve meaningful improvements.

Therefore, 2026’s expected growth of 1.4% is considered a strong sign of an economic turnaround taking shape, with continued reform efforts set to propel South Africa’s growth in the coming years.

However, Kganyago urged for some cautious optimism, saying reforms must be seen in an intertemporal function. “In other words, short-term pain for long-term gain,” he told Newzroom Afrika. 

“The reforms that we had embarked on immediately, there might be pain, but we are seeing the results.” 

Kganyago said the key is to accelerate GDP growth beyond 2% to make South Africans feel the effects of this reform programme.