Global political divides might intrude on the Group of Twenty (G20) finance ministers and central bank governors (FMCBG) meeting which opens in Cape Town on Wednesday, but the Finance Track of the G20 is expected to get on regardless, tackling concrete issues such as the high cost of cross-border payments and the risks of “shadow banking” for financial stability.
They are also expected to tackle the problem of high levels of sovereign debt in developing countries.
SA’s G20 presidency this year has opened in the shadow of the global turmoil that has followed the inauguration of US President Donald Trump in January. The Trump administration’s treasury secretary, Scott Bessent, has declined to attend the Cape Town finance track meetings, a few days after new secretary of state Marco Rubio also refused to attend the G20 foreign ministers’ meeting in Johannesburg.
The G20 Finance Track ministerial meeting is the first of four that SA will host as this year’s president, with a midyear meeting planned in Durban plus two more at the April and October meetings of the IMF and World Bank in Washington DC.
It brings together more than 500 ministers, governors and senior central bank and Treasury officials from the 19 G20 countries plus the EU and AU, which are also members.
In addition are the heads of global financial institutions such as the IMF, World Bank and Bank for International Settlements, which is also hosting its own meeting in Cape Town at the weekend, with the heads of the world’s development finance institutions using the opportunity to meet there.
The Reserve Bank and Treasury co-host the Finance Track, which goes back to the original G20 that was launched in the 1999 Asian/emerging markets crisis as a forum on which the economies most important for the world’s financial system could work together to restore economic growth.
The G20 was expanded to its present form, as a forum led by heads of government, in the depths of the global financial crisis in 2008, with an explicit mandate to restore and safeguard financial stability.
Reserve Bank deputy governor Rashad Cassim said each country that hosted the G20 faced different political and economic constraints and opportunities.
When a country became president in an economic crisis such as the financial crisis or the Covid-19 pandemic the commitment to solve the crisis was strong. “At best, it’s about how rich countries commit resources to poor countries to deal with a crisis,” Cassim said.
But in recent years Indonesia’s G20 presidency faced the difficult political constraints of the Russia-Ukraine war, which made it difficult to get consensus on how the G20 collectively saw the global economic challenges and whether the war set back those challenges.
India’s presidency was able to achieve some gains, though the war continued, but Brazil’s presidency faced the added complication of the differing views on the Middle East conflict.
SA enters its G20 presidency against the backdrop of the unresolved issues the previous hosts had to deal with, as well as the difficult challenge of events in the US and the way in which tariffs and protectionism are an impediment to the global economic recovery.
“But some agendas outlive any kind of crisis,” said Cassim. There was not much controversy among G20 central bankers about the need to reduce the cost of cross-border payments, which are particularly high in Sub-Saharan Africa.
The G20 sought to set common rules and standards and harmonisation frameworks so payments systems could speak to each other across borders. “Our measure of success is can we get momentum to better achieve a cheap, cost-effective and instant payment system across borders,” he said.
The Finance Track also has a crucial role in financial sector issues under the auspices of the global Financial Stability Board, which is a creation of the G20, and provides a forum to harmonise bank regulation.
A focus area for G20 central bankers is nonbank financial intermediation — through entities such as private creditor providers or hedge funds — and the financial stability risks that could emerge from these. It is also looking at how nonbank financial intermediaries affect capital flows.
A big part of the role of the G20 was monitoring risks and vulnerabilities in the global financial system, Cassim said. Gathering and interpreting the data needed to enable this was an important part of its work.
Reserve Bank head of international economic relations and policy Samantha Springfield said though cross-border payments had been on the agenda in the past, the focus was now much more on Sub-Saharan Africa. It was now on “understanding what those pain points are and getting better data so we can understand where we can get the most bang for our buck and move forward”, said Springfield.
Central bankers will be looking at technical issues for the region such as API harmonisation.
There are also several issues for the region related to the international financial architecture, where the Treasury is driving the G20 work.
“Many of the issues have been there for a while but it’s putting a different perspective on them, more of any Africa focus,” Springfield said. There was broad agreement in the G20 about the financial sector issues SA had put on the work plan.
But some of the outcomes and effects of SA’s G20 financial sector agenda would be seen only in future years, Cassim noted — which is why it is important that the so-called “troika”, which includes the past, present and future presidents, take the agenda forward.
The US is due to take over the G20 presidency from SA after the leaders’ summit in November, so is part of the current troika.
Priorities tend to change with every presidency. On climate, for example, the focus of SA’s presidency has been more on adaptation while carbon markets are being looked at in terms of how they can assist in sustainable finance.
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