Reserve Bank Warns AI Could Be a Bigger Threat to South Africa Than Iran War
The South African Reserve Bank (SARB) has warned that artificial intelligence may pose a greater long-term risk to South Africa’s financial stability than ongoing geopolitical tensions, including the Iran conflict.
In its latest financial stability review, the central bank said that while global conflicts continue to influence inflation, fuel prices, and investor behaviour, emerging technological risks linked to AI are becoming more significant and harder to manage.
According to the Reserve Bank, South Africa’s financial system remains stable, but the environment in which it operates has become increasingly uncertain due to both external shocks and rapid technological change.
The Bank noted that geopolitical tensions such as the Iran war have already contributed to higher global oil prices, which in turn have increased transport and fuel costs locally. This has placed pressure on inflation and household spending, while also affecting investor sentiment in emerging markets like South Africa.
However, the SARB warned that artificial intelligence presents a different type of risk — one that is structural, evolving, and potentially more difficult to regulate over time.
One of the key concerns raised is the growing threat of AI-assisted cyberattacks. The Bank cautioned that advanced AI systems could be used to target financial institutions, payment systems, and critical infrastructure with greater speed and sophistication than traditional cyber threats.
The Reserve Bank also highlighted risks associated with algorithm-driven trading and financial automation. While these technologies can improve efficiency, they may also amplify volatility during periods of stress if many systems react simultaneously to market signals.
Another concern is the possibility of inflated valuations in global technology markets driven by rapid investment into AI-related companies. The Bank warned that speculative growth in this sector could increase the risk of financial bubbles that may eventually correct sharply.
Despite these warnings, the SARB emphasised that South Africa’s banking sector remains strong. Major financial institutions are well-capitalised, liquid, and supported by regulatory frameworks designed to maintain stability even during periods of global uncertainty.
The central bank added that while risks are rising, the domestic financial system has so far remained resilient to external shocks, including global conflicts, commodity price fluctuations, and shifts in investor behaviour.
The report further explained that non-resident investors have become more cautious, with capital flows into South African assets becoming more volatile. This has been especially evident in government bond markets, where foreign investor activity can significantly influence pricing and liquidity.
The Reserve Bank also reiterated that inflation remains a key concern. Higher fuel and transport costs, driven partly by global oil price increases linked to geopolitical tensions, continue to place pressure on households and businesses.
However, officials stressed that AI-related risks are increasingly being viewed as a longer-term challenge that could reshape financial systems globally. Unlike traditional shocks such as wars or commodity price spikes, AI risks are seen as continuous and evolving rather than temporary.
Economists say the SARB’s warning reflects a broader global trend among central banks, which are increasingly monitoring technology-driven risks alongside traditional economic threats such as inflation, debt, and geopolitical instability.
The Reserve Bank concluded that while South Africa’s financial system remains stable for now, the combination of global conflict, inflationary pressure, and rapid technological advancement will continue to test the resilience of the economy in the years ahead.