Six South Africans stopping the rand from collapsing

The South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC), led by Governor Lesetja Kganyago, is entrusted with protecting the value of the rand and managing inflation. 

Monetary policy is the means by which the Reserve Bank manages the money supply to achieve its stated goal of limiting inflation to between 3% and 6%, which also protects the currency’s value. 

While the Reserve Bank’s inflation target is set by the government, it is fully independent and has complete freedom in setting the repo rate to achieve this target. 

The MPC’s basic aim is to determine how much money there is in circulation in the South African economy.

This is done through the setting of the repo rate, which affects the financial sector’s borrowing costs and, through that, the broader economy. 

It is called the ‘repo rate’ because banks give the SARB an asset, such as a government bond, in exchange for cash. They can later repurchase (repo) that asset at a lower price, which reflects the interest they paid to have the cash.

Banks then pass on this cost of borrowing from the Reserve Bank to consumers, reflected in the prime lending rate for home loans, car loans, and credit. 

Thus, when the repo rate goes down, it becomes cheaper for banks to borrow from the SARB and, thus, cheaper for South Africans to borrow from banks. This introduces more money into the economy, stimulating activity. 

When inflation runs hot and prices increase, the Reserve Bank will look to raise the repo rate to limit the supply of money in the economy. Raising the repo rate does this in four ways.

  1. Increasing costs for borrowers with variable interest rate debt, such as home loans. This promotes saving and discourages borrowing, weakening demand and reducing price pressures. 
  2. A higher interest rate will strengthen the rand versus other currencies by improving returns on rand-based investments. A stronger rand reduces the price of imported goods. 
  3. Raising rates has a psychological effect on consumers by signalling a commitment to reduce inflation. Price and wage setters will then factor this into their decisions, reducing price and wage increases. 
  4. Higher interest rates will affect the price of assets, in particular, house prices. This may reduce the wealth of asset owners and cause them to cut spending, reducing price pressures. 

Strengthening the rand by raising interest rates is one of the best ways for the Reserve Bank to reduce inflation, as South Africa imports a significant amount of goods, particularly fuel, which is a universal input in the economy. 

Thus, if a stronger currency can reduce the price of fuel, then inflation from petrol and diesel price increases can be limited. 

When the Reserve Bank raises interest rates, the rate of return on fixed-income assets from government debt to corporate bonds also increases. 

These higher yields make these assets, denominated in rands, more attractive to foreign and local investors. 

If other central banks do not raise their rates, the yield differential between foreign assets and South African investments will increase, making them relatively more attractive to foreign investors. 

This will lead to them buying rands and potentially selling foreign assets in exchange for South African assets. As a result, demand for the rand increases and strengthens it against other currencies. 

The Reserve Bank’s key mandate, alongside its regulatory functions, is to manage inflation and, thus, protect the value of the rand. 

This is done by the six people who sit on the bank’s MPC, which is currently looking for an additional member following the resignation of Deputy Governor Kuben Naidoo last year. 

Lesetja Kganyago

Lesetja Kganyago Copyright World Economic Forum.Faruk Pinjo

The MPC is led by Governor Lesetja Kganyago, who has the tiebreaking vote in cases where members are split on a decision. 

Kganyago is one of the most respected central bankers in the world, being rated by international financial institutions as better than some of his peers in more developed markets.

Aside from his roles as Governor and MPC chairman, Kganyago is chair of the Financial Stability Committee. Prior to his appointment as Governor, Mr Kganyago served as Deputy Governor of the SARB from 16 May 2011 until his elevation to Governor.

Kganyago also chairs the Committee of Central Bank Governors of the Southern African Development Community, co-chairs the Financial Stability Board’s Regional Consultative Group for Sub-Saharan Africa, and chairs the Financial Stability Board’s Standing Committee.

Until recently, he served as the Chairperson of the International Monetary and Financial Committee, which is the primary advisory board to the International Monetary Fund (IMF) Board of Governors. Before joining the SARB, Kganyago was the Director-General of the National Treasury.

He holds an MSc in Economics from SOAS University of London and a Bachelor of Commerce degree in Economics and Accounting from the University of South Africa. He also received various training in Finance, Economics and Management.

Dr Rashad Cassim

Rashad Cassim
Deputy Governor of the Reserve Bank Dr Rashad Cassim

Dr Rashad Cassim is one of three Deputy Governors serving on the MPC. He also oversees the Financial Markets and International cluster. 

In this capacity he is responsible for overseeing South Africa’s financial markets, international economic relations and policy, as well as legal services. 

Cassim previously oversaw the Financial Stability and Currency Cluster within the SARB and has worked at Statistics South Africa where he produced inflation statistics.

Before that he was a professor and Head of the School of Economics at the University of the Witwatersrand. 

Nomfundo Tshazibana

Deputy Governor, Fundi Tshazibana

Members of the MPC also have other functions within the Reserve Bank, such as Deputy Governor Nomfundo Tshazibana. 

While being a member of the MPC, Tshazibana is also the CEO of the SARB’s Prudential Authority which regulates the country’s banks, insurers, and other financial institutions. 

Tshazibana joined the SARB in 2018 and was appointed Deputy Governor in 2019. She has previously worked at the National Treasury, Nersa, and the International Monetary Fund (IMF). 

At the National Treasury, Tshazibana was responsible for macroeconomic policy and economic forecasting before joining the board that runs the day-to-day operations of the IMF.

Dr Mampho Modise

Deputy Governor of the Reserve Bank, Dr Mampho Modise

Dr Mampho Modise is the third Deputy Governor the SARB. Aside from being a member of the MPC, Modise also oversees the Financial Stability Cluster. 

This includes the newly established Corporation for Deposit Insurance, which insures all deposits at banks up to a value of R100,000. 

Modise’s responsibilities also include running the Economic Statistics Department, the Risk Management and Compliance Department, and the bank’s Fintech Unit. 

She is the newest Deputy Governor, having been appointed with effect from 1 April 2024. 

Before joining the SARB, Modise was Deputy Director-General of Public Finance at the National Treasury, responsible for fiscal and financing monitoring and evaluation of policy proposals. 

She was also responsible for assessing the performance and oversight of public and state-owned entities.

Modise has previously worked at the Reserve Bank in its Economic Research Department. 

Dr Chris Loewald

MPC member and head of economic research at the SARB, Dr Chris Loewald

Dr Chris Loewald is the head of the bank’s Economic Research Department, which is responsible for its forecasting, economic analysis and publicaiton of the Monetary Policy Review

Prior to joining the SARB in 2011, Loewald spent 13 years at the National Treasury in a range of policy roles. 

He was involved in developing South Africa’s inflation-targeting and exchange-rate policy frameworks, and he led the development of the macroeconomic framework for successive national budgets. 

As Deputy Director-General for Economic Policy, Loewald worked extensively on economic growth and governance with the IMF and the World Bank. 

Dr David Fowkes

Adviser to the Governors, Dr David Fowkes

Dr David Fowkes is an adviser to the Governors and joined the MPC at the beginning of this year. 

Fowkes previously worked in the bank’s financial markets department, leading the reform of its Monetary Policy Implementation Framework. 

Between 2013 and 2021, he worked in the Economic Research Department, where he edited the Bank’s flagship publication on monetary policy ‒ the biannual Monetary Policy Review, and provided analyses on domestic economic developments for MPC meetings.


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