South Africa’s finance minister rebuffed a call by some in the nation’s governing party for him to push the central bank to use measures other than lifting borrowing costs to curb inflation, as he reaffirmed the bank’s independence.
The African National Congress on Sunday asked Enoch Godongwana to hold urgent talks with the South African Reserve Bank about ways to address the surging cost of living “other than raising interest rates.”
The comments come as the ANC gears up campaigning for presidential elections next year when the party risks losing political support because of weak economic growth, high unemployment and growing inequality.
“I’m not in discussion with the central bank on that matter,” Godongwana said Tuesday in an interview with Bloomberg Television at a meeting of Group of 20 finance chiefs in Gandhinagar, India.
“The central bank in South Africa, by the constitution, is independent, and its purpose is defined as that of protecting the value of the currency in the interests of balanced growth.”
The SARB’s monetary policy committee has raised its benchmark rate by 475 basis points since November 2021 in a bid to rein in inflation that has been above the 4.5% midpoint of its target range, where it prefers to anchor price-growth expectations for more than two years.
The central bank is scheduled to announce its next rate decision on Thursday, the day after the latest inflation data is released. Economists surveyed by Bloomberg forecast annual price growth slowed to 5.5% in June, compared with 6.3% in May. They expect the SARB to raise rates by 25 basis points to 8.5%.
Godongwana regularly meets with central bank Governor Lesetja Kganyago to make proposals on the direction of policy.
While the ANC has previously called for the central bank’s mandate to be broadened to shore up the economy, it has said it’s committed to preserving the bank’s independence.
The bank is “required to be in consultation with the minister responsible for finances” under the constitution, “but that doesn’t mean the minister responsible for finances can tell them what to do,” Godongwana said.
Kganyago said earlier this month that while tight monetary policy is painful, high inflation does even more harm to those who can least afford it.
“Inflation is ravaging the poor,” he said in a July 5 interview with Johannesburg-based broadcaster Metro FM. “The rich have got property. They’ve got shares, and those cushion them against rising inflation.”
Those craving relief from elevated borrowing costs should understand that the way to get them is price stability.
“Inflation has got to fall because we know historically that when inflation is low in South Africa, South Africa experiences lower interest rates,” Kganyago said. “That is where we should be going.”
Godongwana also said the Treasury expects to reduce its economic growth forecast because of frequent power outages in South Africa.
The revised estimate will be announced when the finance ministry unveils its medium-term budget statement in October, he said, declining to provide specific numbers.
The Treasury forecast in February that the economy will grow 0.9% this year, compared with 2.5% last year.
The fluctuation in electricity output makes it hard to make a reliable estimate at this stage, Godongwana said.