The South African Reserve Bank (SARB) Governor, Lesetja Kganyago said US President Donald Trump’s policy onslaught may cause the global economy to splinter.
The Governor made these comments on Monday in Cape Town as South Africa hosted the G20 Finance Track meetings, led by National Treasury.
Kganyago said that the global economy has seen the negative effects of Trump’s policies.
“We are seeing trade fragmentation, we are seeing economic fragmentation, and it just raises the level of uncertainty,” he said.
The Governor said that Trump has beaten up the global financial markets with his threats of tariffs on products including steel, aluminium and motor vehicles.
“This heightened uncertainty has implications for global trade and thus has implications for the global economy,” Kganyago told Bloomberg.
He noted that Trump’s actions have had serious implications on how central banks make policy.
Kganyago said that economies like South Africa should try to strengthen their resilience and continue to buffer their reserves.
“The only thing that a small open economy can do is to strengthen its resilience and build the buffers because this thing would come as a shock,” he noted.
The rise of populism
In mid-February, Kganyago also highlighted the rise of populist leaders and how they pose a threat to central banks.
“Whether we are talking about rich countries or poorer ones, there is no denying that we are in an age of populism. We need to reflect on why populist ideas have this appeal and how we can respond,” the Governor said.
He noted that populism was only seen in developing countries, but we are now seeing populism in mature democracies like the US.
He then focused on institutions like central banks and said that populist countries have hostility towards these vital institutions.
"Populists have long been defined, in part, by their hostility towards these institutions. The standard attack is that existing institutions are controlled by elites, who treat ordinary people with contempt and ignore their interests,” Kganyago explained.
“Populist leaders also typically promise to wage war on institutions, to clean out what they claim as the corrupt intermediaries so that they can take charge themselves. Unfortunately, when populists come into power, they usually fare badly,” he noted.
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