South Africa has unveiled a new inflation target of 3% with a 1-percentage-point tolerance band, marking the country’s most significant shift in monetary policy in 25 years amid sharp political criticism.
The Ministry of Finance and the South African Reserve Bank (SARB) announced on Wednesday that the target will be phased in over two years, replacing the long-standing range of 3% to 6%.
Authorities say the revised framework is designed to reduce inflation expectations, ease borrowing costs, and create space for lower interest rates. They argue that the move will ultimately stimulate household spending, business investment, economic growth, and job creation.
A new direction for macroeconomic policy
In a joint statement, the National Treasury and the SARB stated that the new target emerged from a comprehensive review.
“As part of a broader review of macroeconomic policy, and in line with international developments, National Treasury and the SARB… undertook a comprehensive assessment of the appropriate level of inflation target,” the release stated.
Officials acknowledged that a lower target may create short-term fiscal pressure by reducing nominal GDP and revenue growth, making fiscal targets more challenging to meet. But they insist the economic benefits outweigh the risks.
They argue that over time, the tighter anchor will produce lower inflation, enhanced policy credibility, and improved long-term planning for households and firms.
Political storm erupts
The decision has triggered fierce criticism from the Economic Freedom Fighters (EFF), led by Julius Malema, who condemned the new target as “misguided” and harmful to South Africa’s economic majority.
Malema accused policymakers of prioritising financial markets over ordinary citizens.
He said the new target “only favour[s] bondholders and private investors while ignoring the needs of South Africa’s majority.”
He renewed the EFF’s call for the nationalisation of the South African Reserve Bank and the adoption of a monetary policy framework that includes explicit developmental objectives.
“The National Treasury’s attempt to downplay the consequences of this policy shift, claiming the negative effects will be short-term, reveals the extent of state capture by financial elites,” Malema said.
He further attacked the Treasury for measuring economic health through investor satisfaction rather than employment, production, and social welfare.
“This approach… will make the cost of borrowing even higher and ensure that banks and financial institutions continue to record profits in an economy that is otherwise collapsing,” he stated.
A clash over sovereignty and monetary control
The announcement comes months after tensions between Finance Minister Enoch Godongwana and SARB Governor Lesetja Kganyago. In August, the SARB publicly signalled its preference for a 3% target, prompting Godongwana to object, insisting it was not government policy.
Malema has seized on Wednesday’s announcement as proof of what he calls foreign influence over South Africa’s economic direction.
“When this policy was announced prematurely by the Governor of the SARB, the Minister himself correctly objected,” Malema said. “His reversal under pressure from Goldman Sachs and JP Morgan represents nothing less than the surrender of South Africa’s policy sovereignty to foreign financial interest.”
The Medium-Term Budget Policy Statement, delivered on the same day, emphasized fiscal consolidation and measures to boost economic growth—priorities that hinge on rebuilding investor confidence.
Analysts say the new inflation target moves South Africa closer to global norms, particularly among emerging markets pursuing stricter monetary anchors.
But they acknowledge the risk of political friction as the government navigates high unemployment, pressure on public finances, and a fragile economic recovery.
This marks the first overhaul of South Africa’s inflation-targeting framework since its introduction in 2000, underscoring the scale of the policy shift.
