Seigniorage revenues (the difference between the value of physical money produced and the cost to produce and distribute it) represents a meaningful source of funding for many central banks. Historically, issuance costs have consumed around a quarter of implied seigniorage revenues in South Africa. Between 2023 and 2025, as a result of a decline in the stock of notes and coins and an increase in the cost of issuing and managing cash, SARB did not produce meaningful seigniorage from producing physical currency. However, in the latest financial year, the implied cost of producing currency fell towards its long term average.
The implication has been that SARB has become more dependent on the seigniorage revenues it generates from reserve requirements it imposes on banks, as well as income from managing assets on behalf of government. The former represents a type of financial repression – affecting market interest rates and the cost of debt. As we have shown previously, this costs South African banks (and therefore consumers) billions of rands per year. This is also no longer necessary for the implementation of monetary policy. But SARB may be reluctant to reform this arrangement given the pressure on its seigniorage revenues. Reliance on income from managing assets for government also poses challenges for the central bank, with periodic political pressure on SARB to realise unrealised profits on South Africa’s foreign reserves. It is also worth noting that SARB stands out internationally for its ability to set its own budget, which, while preventing political interference, creates a range of governance and accountability challenges.
SARB’s rising cost base has also been one reason why the SARB did not transfer any income to the government between 2010 and 2019 and has not transferred any income since 2021.
