ANC will increase pressure on the Reserve Bank

Lesetja Kganyago

The South African Reserve Bank (SARB) will experience more pressure from the African National Congress (ANC) and other politicians as the government benefits from high inflation. 

Efficient Group chief economist Dawie Roodt told Business Day TV that he is concerned about inflation rising in the coming years due to government pressure on the SARB. 

“We will see more pressure from politicians on the SARB over the next few months and years,” Roodt said. 

This is partly due to a general election next year but is more about the fact that high inflation benefits the government. 

Inflation erodes the value of money and, importantly for the government, erodes the value of debt. This allows the government to “inflate away its debt”. 

While Roodt believes South Africa has reached the turning point of its current interest rate hiking cycle, a lot will depend on who wins the election next year. 

Not only will the election winners determine the government’s fiscal policy, which influences inflation, but the government will also select the next Reserve Bank governor. 

Current Reserve Bank governor Lesetja Kganyago declined to explicitly say whether he’d be prepared to continue serving as central bank governor when his term ends in November 2024. 

Kgangayo has been at the central bank for 12 years and in different roles in the public service since 1994.

The governor has come under increasing pressure from the ruling ANC, with its secretary general, Fikile Mbalula, calling for the Finance Minister to push the SARB to refrain from further interest rate hikes. 

“Looking at the comments of the ANC about the Reserve Bank, I am getting concerned about inflation,” said Roodt. 

Dawie Roodt
Dawie Roodt

Roodt has previously noted the clash between the government and the Reserve Bank. 

He is most concerned about the clash between the SARB’s monetary and the National Treasury’s fiscal policy.

This macroeconomic clash between the SARB and the government will result in low economic growth with high inflation.

The government’s commitment to expansionary fiscal policy actively undermines the Reserve Bank’s attempts to bring inflation down.

Roodt said politicians like inflation because it erodes the value of the government’s debt, allowing it to spend more while not increasing debt in real terms.

Thus, he suspects that “politicians will put more pressure on the Reserve Bank to relax monetary policy” in the future.

Such calls are heard already, with politicians in the government and the opposition calling for the nationalisation of the SARB and changing its mandate.


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