In an address at the Kgalema Motlanthe Foundation Drakensberg Inclusive Growth Forum, South African Reserve Bank Governor Lesetja Kganyago discussed the interaction between tariffs and exchange rates in 2025 and argued that South Africa’s external position has strengthened, with a less volatile rand and foreign exchange reserves now above USD 70 billion. The speech contrasted the textbook expectation that tariffs should strengthen a country’s currency with recent US experience, where the dollar appreciated to a January peak but then depreciated by around 7–8%, alongside evidence of more aggressive FX hedging rather than large-scale selling of US assets. Against that backdrop, 2025 has been more supportive for emerging markets than feared; for South Africa, he pointed to rising terms of trade, a stronger and less volatile rand, and lower domestic interest rates across the yield curve. Kganyago reaffirmed South Africa’s long-standing free-floating exchange rate policy, describing it as a shock absorber and noting limited foreign currency debt and lower exchange rate pass-through to inflation. He linked a shift toward permanently lower inflation, including the South African Reserve Bank’s stated preference for inflation to settle at the bottom of the 3–6% target range, to less need for ongoing currency depreciation relative to peers. He also highlighted that option-implied rand volatility is at long-term lows and that reserves surpassed USD 70 billion in August, meeting major reserve adequacy metrics including the International Monetary Fund’s measure; if the rand becomes “uncomfortably strong”, the Bank would be willing to accumulate more reserves.
South African Reserve Bank 2025-10-10
South African Reserve Bank Governor points to USD 70bn reserves milestone and readiness to accumulate more if the rand strengthens
South African Reserve Bank Governor Lesetja Kganyago, at the Kgalema Motlanthe Foundation Drakensberg Inclusive Growth Forum, highlighted South Africa's strengthened external position with a less volatile rand and foreign exchange reserves over USD 70 billion. He emphasized the benefits of a free-floating exchange rate policy as a shock absorber and noted the shift towards lower inflation within the 3–6% target range. Kganyago also mentioned that option-implied rand volatility is at long-term lows and that the Bank is prepared to accumulate more reserves if the rand becomes "uncomfortably strong."