Lesetja Kganyago gives brutally honest feedback on Reserve Bank mandate

South African Reserve Bank Governor Lesetja Kganyago said South Africa’s inequality and unemployment are structural, and the central bank does not have the tools to deal with them.

At the ANC’s 2022 National Policy Conference, the party said job creation should form part of the Reserve Bank’s mandate.

Finance Minister Enoch Godongwana said they supported the Reserve Bank’s inflation-targeting policy and independence but would like an explicit mention of job creation in its remit.

Commenting on inequality and unemployment, Kganyago told CNBC Africa the biggest source of South Africa’s inequality is “not because there are people who are earning too much or too little.”

“The biggest reason for inequality is because there are people earning, and there are people getting zero income – called the unemployed.”

He explained that unemployment in South Africa is structural. “Even when the economy was booming, the lowest unemployment we could get was 23%,” he said.

“We have to accept that we have an economy that is looking for a particular set of skills of a modern economy,” he said.

However, South Africa’s education system produces skills that do not match the economy’s needs.

Commenting on the ANC’s plan to change the Reserve Bank’s mandate to include job creation, Kganyago said it might be a step too far.

“Society has an inflated expectation of what central banks can do, partly because they called themselves the only game in town in 2020,” he said.

“When problems arise, people expect the central bank to do something, even if the bank does not have the tools to deal with it.”

“Unemployment is a structural issue. The contribution of the Reserve Bank is through price stability, as the constitution says.”

“We make our decisions in the interest of balanced and sustainable growth.”