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:

Sources: M3 from OECD database and Central bank; nominal GDP from IMF database, as at November 2025

The medium-term relationship between money and nominal GDP growth in South Africa, 1966-2024

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.

Inflation peaked at a 12 year high of 7.6% in October 2022, but has since fallen back to the central bank’s 3%-6% target range. Although broad money growth rose in 2020 thanks to a fiscal stimulus package and monetary easing, these were more modest in scope than those of most advanced nations so M3 growth never reached excessive levels and moderated in 2021. The relatively short duration of the inflationary spike is therefore unsurprising. The central bank, after first raising the cost of borrowing in early 2022, continued with further interest rate rises untl early 2024. There have been a series of rate cuts since September 2024, perhaps unsurprising as GDP growth  has been very modest in the last two years.