Kganyago slams ANC critiques of Reserve Bank policy

South African Reserve Bank (SARB) governor Lesetja Kganyago reiterated the SARB’s commitment to tight monetary policy and dismissed critiques from politicians calling on the Reserve Bank to relax its stance on inflation. 

Kganyago answered questions about the Bank’s monetary policy and recent political critiques at its Annual General Meeting last week.

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

There have also been repeated calls from within the ANC and other political parties for the SARB’s mandate to change, and even some calling for the nationalisation of the Reserve Bank. 

When asked if the SARB should better explain the benefits of higher interest rates to savers, Kganyago took the opportunity to address political critiques of the Reserve Bank’s tight monetary policy. 

The governor reminded the government that both savers and borrowers are voters. 

“I do not understand why political leaders speak as if the only people who elect them are borrowers – it does not look like savers matter. Once savers have stopped saving, who will the borrowers borrow from? They need the savers,” Kganyago said. 

Higher interest rates result in higher returns for those with savings accounts, while fixed-income investments such as government bonds provide higher yields. 

Purchasing government bonds is crucial for a modern economy as it provides funding for the government to perform its functions and, ideally, make large investments in infrastructure. 

“Nobody is speaking for the savers, but the more savers we have, the more we will be able to meet our financing needs,” Kganyago said. 

Critics believe that the Reserve Bank’s tight monetary policy has made borrowing more expensive and reduced consumer spending, harming economic growth.

Dawie Roodt
Dawie Roodt

Efficient Group chief economist Dawie Roodt explained that the government benefits from high inflation and would thus put pressure on the SARB to relax its stance. 

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”.

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

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 SARB for 12 years and in different roles in the public service since 1994.

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


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