Bond markets in meltdown, AI vs the repo rate, and why petrol prices depend on a “crack spread”: here’s what happened when the Reserve Bank came to Potchefstroom.

The room was quiet at first. Then our honours students started presenting, and you could see the excitement spread across their faces. South African Reserve Bank (SARB) Deputy Governor Ms Nomfundo (Fundi) Tshazibana joined students at NWU’s Potchefstroom Campus, hosted by the Faculty of Economic and Management Sciences. Our students presented their ideas and put their questions straight to her. Some of them had heads turning.

What does a central bank do when nobody will buy bonds?

Tshazibana took students back to March 2020. She had been Deputy Governor for a year when the pandemic hit. Markets had stopped setting prices, and after the announced credit-rating downgrade, institutional investors were dumping government bonds with no one on the other side to buy.

Her answer was the “market maker of last resort” role. The biggest effect came from the first announcement of a bond purchase programme. She was clear that it was not quantitative easing (QE). It fixed a liquidity problem. QE, she said, is an “inferior tool” that other central banks used only because interest rates had hit the floor.

The lesson that stuck: “We’ve learned about having layered instruments. We’ve learned about preparing for crisis during peace times.”

Since then, the SARB has built a formal framework for market dysfunction covering the money, government bond and foreign exchange markets. It also now uses scenario planning, even for unlikely outcomes.

Why inflation matters to you!

South Africa is a small open economy, so prices decide whether we can compete. Tshazibana explained why ignoring inflation backfires: “Our view is that if you do nothing about inflation, inflation will erode the growth rate.” Higher prices also push households to demand higher wages, and businesses with costlier prices lose out to global competitors.

Her ideal is “a world where inflation actually doesn’t matter for you”, so you can plan with confidence.

Why does diesel cost so much? Pump prices include the Brent crude price, the exchange rate and the refining margin (the “crack spread”). With two wars disrupting fuel supply and South Africa importing more refined product than it used to, that margin now matters a lot.

The questions that turned heads

• Digital money: If everything goes digital, can the SARB still manage inflation with the repo rate when it can’t “print money”?

• AI: How AI can be regulated to support jobs and sustainability in a developing economy.

• Pressure vs policy: When a technically correct decision is unpopular, how do regulators handle political pressure?

Safety alongside inclusion

On financial inclusion, her message was direct: “Safety alongside inclusion.” Providers who reach remote communities matter, but if they don’t protect depositors, regulators must step in. “If we just do inclusion at all costs, humans are at risk.”

On independence, she said accountability is what protects it: “Having platforms like this, and having the public holding the central bank to account, is the most important thing.”

Why this matters for postgraduate study

Sessions like this connect postgraduate studies at NWU to the people shaping South Africa’s economy. Our students tested their thinking against someone who makes these calls.

Keep exploring: Visit NWU’s Faculty of Economic and Management Sciences or read about the SARB’s mandate.