South African Reserve Bank (SARB) Governor Lesetja Kganyago has ruled out increasing the denomination of South Africa’s banknotes.
Speaking at the 106 annual Ordinary General Meeting on Friday, Kganyago said printing higher-value notes would not strengthen the economy and could instead undermine the value of the rand.
This comes amid the Middle East war that has created global uncertainty and has increased financial pressure at the fuel pump stations amid increases on the global oil prices.
This has been the reason behind the recent inflation increase to 5%, the highest recorded in the past two years, and the increase of the interest rate by 25 basis points in May, although it was kept unchanged in July.
Rate hike sting ‘felt harshly’
He said the pain of increasing prices was felt harshly and the Reserve Bank is no exclusion.
“Our constitutional mandate is to protect the value of the currency in the interest of balanced and sustainable economic growth. Since our previous Annual General Meeting, we have taken a big step to do that better.
“After 25 years, our inflation target has finally been reformed. We used to target a range of 3-6%. From 2017, we explicitly aimed at the 4.5% midpoint of that band. In 2025, South Africa formally adopted a 3% target, plus or minus one percentage point,” said Kganyago.
Banknote denomination ‘will fuel crime’
He noted that increasing the banknote denomination would mean that the country is giving in to inflation, losing purchase power or experiencing currency depreciation. He said when SA introduced R200 banknotes, it was considered that South Africa had given in to inflation.
He also highlighted to the shareholders that this would also increase crime, saying that it raises concerns about its association with illegal activities such as money laundering and tax evasion.
“I travel to Europe very frequently. I am yet to see the €500 but it exists. The word in the street is that the €500 once issued, it disappears into the underworld, and you will not see it anywhere,” said Kganyago.
- SARB Governor Lesetja Kganyago ruled out increasing the denomination of South African banknotes, citing risks to the rand's value.
- The decision comes amidst global economic uncertainty due to the Middle East war and rising global oil prices, which have driven inflation to 5%.
- South Africa’s inflation target was reformed from a 3-6% range to a formal goal of 3% ±1% by 2025 for better economic stability.
- Kganyago warned that higher denominations could fuel crime, including money laundering and tax evasion, referencing the limited circulation of €500 notes in Europe.
- The SARB remains focused on protecting the currency’s value to support balanced and sustainable economic growth.
