Governor of the South African Reserve Bank, Lesetja Kganyago acknowledged that increasing interest rates can cause financial distress, however, he noted it is important to control inflation.

"We, unfortunately, have to administer particular medicine in order to tame inflation," Kganyago said on Wednesday during an interview with broadcaster eNCA, WindsorStar reported. "Failure to administer that medication might result in the patient having to undergo surgery or end up in intensive care."

In May, the interest rate was 8.25%, which has been recorded highest in the last 14 years. However, the central bank's monetary policy committee is working to bring back the interest rate to 4.5%.

"When inflation rises or stays elevated, it is appropriate that monetary policy adjusts and that adjustments take place through interest rates in order to bring inflation down," the governor explained.

Kganyago noted that the South African economy has been struggling due to rolling power cuts and logistics constraints, although he shared that "crisis" is not the word he would use for the ongoing situation.

He went on to share that if there were no energy shortages and logistics issues, the gross domestic product (GDP) would have increased to 2.3% this year.

"There are things that are working in this economy, in spite of the troubles that we have," the governor said. "One of the things we are picking up is, what is almost driving investment now, is businesses are investing in renewable energy and backup power. That comes from the resilience of the economy."

Furthermore, Kganyago also shared that the South African government's engagement with the United States will retain its duty-free access to American markets under the African Growth and Opportunity Act.

African Growth and Opportunity Act (AGOA) was introduced by the U.S. Congress in May 2000. It was created in order to promote economic development in African countries as they would get duty-free access to the U.S. market, where a wide range of products can be supplied.

AGOA has resulted in increased trade between South Africa and the United States. Moreover, it has contributed to South Africa's economy by helping to diversify its exports and expand its market reach. Considering the trade between both countries, the United States imported US$14.66 billion from South Africa last year.

Talking about the increased interest rate, the South African Reserve Bank (SARB) opted for a 50-basis point (bps) rate hike, which is a measure that helped the agency change the interest rate of any financial securities, to keep inflation under control.