Change the world


SARB Governor Dr Lesetja Kganyago spells it out at Nelson Mandela University. Climate change is real, and we need decisive action to slow rising temperatures.


Nelson Mandela University Deputy Vice-Chancellor Learning and Teaching Dr Muki Moeng and Faculty of Business and Economic Sciences Executive Dean Professor Hendrik Lloyd welcome South African Reserve Bank Governor Dr Lesetja Kganyago to the Faculty of Business and Economic Sciences last week.

At the same time, said South African Reserve Bank Governor Dr Lesetja Kganyago in Gqeberha, it was important to know who should be taking action, and what those actions should be.

Dr Kganyago was presenting a public lecture at Nelson Mandela University’s Second Avenue Campus on Thursday, 19 October. 

“While the combination of urgency and complexity is daunting, it is important that we think carefully about policy coordination,” said Dr Kganyago, who holds an honorary doctorate from Nelson Mandela University.

Specifically, he outlined:

  • How climate change affected the SARB’s core mandate;
  • How to reduce the risks of policy design and coordination failures;
  • How to avoid over-reach driven by these policy challenges.

“South Africa’s high carbon intensity of production has already exposed us to the European Union’s (EU) Carbon Border Adjustment Mechanism, which will see an increase in the cost of our exports,” said Dr Kganyago.

“Prices of products and services from weather-dependent sectors such as agriculture and carbon-intensive sectors will increase more rapidly.

“We are rapidly approaching what is being referred to as global climate tipping points, which, once crossed, lead to greater disruptive effects of climate change on our livelihoods.”

He asked his audience to consider the profound economic effects.

“Think about experiencing the 2022 KwaZulu-Natal floods every year, just twice as severe. Or having no rainfall in the citrus-producing regions of South Africa, destroying part of our agricultural sector.

“Climate change affects economies through multiple supply and demand channels.”

The multidisciplinary nature of the crisis called for a comprehensive response. However, avenues such as reducing the cost of transitioning from fossil fuels to other sources of energy remained firmly in the hands of government.

On the fear of job losses that a clean energy transition could bring, Dr Kganyago said that policy actions to help workers reskill and relocate to greener firms would maximise employment gains.

And, whether or not South Africa was a major contributor to global warming, he said, “if the temperature rises, it rises for the whole planet. We have to bring to the fore that we have a collective responsibility.”

However, he warned against expecting the SARB to step in to tackle areas not related to its mandate.

“A central bank will not be worth anything if it has lost focus,” he said.

“While we certainly have a role to play, when it comes to broader society and economy-wide systems, it is best to think of central banks as just one important node in a neural network. The power of a network comes from how the different nodes.”

Transitioning the electricity sector more rapidly to green generation could be a major catalyst for investment in sectors across the economy.

However, he asked, “what role have central banks played in the development of renewable energy technology?”

The answer was “not much”.

“We have neither the skills nor the tools to assist. The major driving forces of green innovation are factors such as carbon taxation, research and development (R&D) investment and equity funding, often in the form of venture capital.

“These fall entirely within the mandate of governments, which are responsible for taxation and a variety of incentives to encourage R&D spending and equity funding.

“The best way for a central bank to support technology development and adoption is not by funding it but by being better at reducing the costs associated with inflation, hedging and financial instability.”

In the Q&A session after his address, the governor showed his mental agility and wit in providing rapid, yet appropriate, responses to a range of challenging comments and questions.

This energy extends further than his intellect, say his staff. Physical fitness is important to Dr Kganyago, who walked the seven blocks from his beachfront hotel to the Second Avenue Campus, and swopped the lift for the stairs to the third floor of the Business School’s green building.

Although his address focused on big-picture policy issues, the Governor used the Q&A to remind the audience that it was the poor who suffered the most devastating effects of global warming.

This demographic also suffered from the highest  inflation rate.  While South Africa’s most recent figure was 5.4% – and 5.6% for the Eastern Cape – this masked deep socio-economic differences.

“The poor are being hit harder,” Kganyago said, outlining how those in the lowest income groups faced an inflation rate of 9.2%  while those in the top 20% were able to cushion the negative effects, with an inflation rate of closer to 4.5%.

This was why the Reserve Bank at times had to dispense the “bitter medicine” of adjusting key interest rates in its quest to ensure macroeconomic stability.

Contact information
Ms Elma de Koker
Internal Communication Practitioner
Tel: 041-504 2160