South Africa

An overview of the effects of monetary policy in South Africa on GDP and inflation, from 1966 to the present day.

% annual growth rate:

  M3 Nominal GDP
1966-2020 13.16% 12.73%
1966-1970 9.72% 10.21%
1971-1980 16.07% 17.45%
1981-1990 16.76% 16.57%
1991-2000 12.39% 12.23%
2001-2010 15.13% 12.53%
2011-2012 7.15% 6.13%

Sources: M2 from OECD database and nominal GDP from IMF database, as at February 2022

The medium-term relationship between money and nominal GDP growth in South Africa, 1966-2022

Five-year moving averages of annual % changes, with 1968 being the start of the first five-year period

Comment on monetary trends in South Africa

South Africa has maintained a good track record of moderate inflation for several decades now. Unlike the other countries in the region, the Reserve Bank of South Africa has managed to keep money growth in check and thus avoid hyperinflation. This has resulted in the national currency, the Rand, becoming legal tender in other neighboring economies such as Lesotho, Swaziland and, since 1992, Namibia. While allowing the Rand to be used, they also use their own currencies at the same time, under the Common Monetary Area arrangement of 1986. In addition the Rand is also used without a formal agreement in other neighbouring countries like Zimbabwe.

In spite of the relative monetary stability in the country, inflation rose as high as 15% during the oil crises in the 1970s and double-digit inflation persisted until the mid-1990's. Part of this inflationary bias can be attributed to the steady depreciation of the Rand versus the US Dollar since the mid 1980s and excessive money growth in the 1970s and 1980s, at rates well above price stability (16% and 16.8%, respectively).

More moderate rates of growth of broad money since the early 1990s (12.41% on average), and an inflation target of 3-6% per annum was adopted in 2000, which has succeeded in bringing down both broad money growth and inflation to a more satisfactory level.