the spread for south african bonds over us treasuries peaked around 460 bps by late september due to domestic factors but also in anticipation of us tightening and general risk aversion, from 350 bps a year ago. emes in general have experienced varying degrees of vulnerability during 2015, largely owing to negative country - specific factors, which include political uncertainty in turkey and increasing concerns about the economic outlook for brazil. standard and poor ’ s ( s & p ) downgraded brazil ’ s sovereign credit rating to sub - investment grade in september 2015. domestic funding costs for banks in south africa have, on the other hand, been negatively influenced by a further dynamic in the aftermath of the gfc, namely more stringent global financial regulations which are being implemented locally. with the upcoming introduction of the net stable funding ratio, the spread to jibar of floating - rate ncds issued by commercial banks increased significantly across all maturities, in some cases more than double the levels seen around mid - 2013, as banks are forced to issue longer - term instruments. there is a general view that financial regulatory reform, while necessary, may have had certain unintended consequences, such as limitations on banks ’ proprietary trading, reducing the bis central bankers ’ speeches willingness and ability of primary dealers to hold sizeable inventories of securities, which have contributed to less liquidity in the markets. this lower level of liquidity introduces new risks through an increase in market volatility that could amplify negative spill - over effects in stress situations. another frequently discussed challenge is that of emes ’ foreign - currency corporate borrowing in us dollars and the impact of the stronger dollar and higher yields on debt - servicing and refinancing risks. the total us dollar exposure from both bank loans and debt securities has been growing rapidly over recent years to approximately usd3, 3 trillion, according to the bis. for south africa, this does not present a significant risk, given relatively low level of foreign liabilities of local companies and banks. however, excessive us dollar appreciation could have ramifications for highly indebted emerging markets, resulting in increased volatility and a selloff in em assets. this might very well spill over to other emes, including south africa. the second sub - channel, the foreign - exchange market, is probably the market that may suffer a more pronounced impact from global monetary policy normalisation. this risk was illustrated during the 2013 “ taper tantrum ” when the rand –

public lecture by lesetja kganyago, governor of the south african reserve bank, at the university of south africa, pretoria 24 july 2019 delivering on our mandate : monetary policy, inflation, and balanced and sustainable growth good morning, ladies and gentlemen. today, i would like to talk about the south african reserve bank ’ s ( sarb ) mandate : what it is, how we interpret it, and where we are in our national conversation about the sarb. although central banking has a global reputation for being boring, in south africa it has been getting a lot of attention. much of this is welcome : it is largely a useful opportunity for improving public understanding of what the sarb does, while we at the sarb also learn and benefit from our interactions with people all over south africa. however, some parts of the discussion are problematic because they distract us from more pressing priorities. as mr tito mboweni, the finance minister, has pointed out : this ‘ obsession ’, to use his phrase, is getting in the way of a more fundamental discussion about economic growth, job page 1 of 14 creation and dealing with inequality. 1 this economy used to grow at 3 % or 4 % a year, but now it grows at about 1 %. as we in the sarb have tried to communicate : the growth problem in south africa is mainly structural in nature, beyond the reach of monetary policy alone. perhaps part of the problem is that whenever we get a new gross domestic product ( gdp ) statistic, the news bulletins and the newspaper articles end up talking about what it means for the next monetary policy committee ( mpc ) meeting. given this pattern, you might well assume that interest rates have large growth consequences. but we need some perspective. if we reduce rates by 25 basis points, and there are no other reforms in the economy, our modelling tells us that growth will be about 0. 1 percentage points higher, one year later. that ’ s all. remember that when we cut rates, borrowers have more spending power but lenders have less. exporters may do better from a weaker rand, but firms that use imports do worse. investment may pick up, but that depends on long - term rates, not just the repurchase rate ( repo rate ) – in addition to many non - monetary factors. so the growth effects of a rate cut are small. and if we as a country obsess about the sarb and monetary policy as the only