South Africa

One thing the Reserve Bank Governor would do to fix South Africa

South African Reserve Bank (SARB) Governor Lesetja Kganyago said the one thing he would do to fix South Africa is focus on execution and avoid more mandates than the government has instruments to achieve.

Speaking on Bruce Whitfield’s The Money Show, Kganyago explained that South Africa tends to prioritise everything, making nothing a priority.

“That is what South Africa is – we make everything a priority, and as a result, we do not focus,” he said, echoing a speech he made in 2021 sharing the same sentiment.

Kganyago described a rule that is applied when implementing a policy: You must only have as many policy targets as you have instruments.

He used the Reserve Bank as an example, saying, “If you have a central bank with a price stability mandate, it would have instruments to pursue that objective”.

“So, if you have a central bank with a price stability mandate, it would have instruments to pursue price stability,” he said. “If you have to add other responsibilities, you will need additional instruments.”

“You can’t pretend you would use the same instruments to achieve a multiplicity of objectives – some of those objectives are bound to fail because the instruments would be designed to achieve a particular objective.”

He said this is a mistake often made when it comes to successful institutions – if an institution succeeds in its main mandate, society often expects it to fulfil other roles as well.

“Part of the reason why we end up not making progress is that, especially when you have an institution that is successful, we then tend to think that it can do all these other things,” he said.

“Put simply, around the world – and South Africa is no exception – you have societies that have an inflated expectation of what central banks can do, whereas central banks have been designed to pursue part mandates that are given to them by society, and it is actually what we should be sticking to.”

When asked about the one thing he would do to fix South Africa, Kganyago said there is not silver bullet, “but here is the point: execution, execution and execution – that’s all we have to do”. 

He explained that South Africa has good policies but often fails to execute them well. The people meant to implement them are focused on too many priorities and do not have an effective implementation plan.

“Good policies start with an implementation plan, then execution,” he said. “Once you add a multiplicity of objectives, you end up with a situation where probably none of them get met.”

Kganyago used the success of getting the private sector and government focused on solving the country’s electricity problem as an example of successful execution. 

“It’s led to us having electricity for a period that we have taken for granted – a continuous 90-day period of uninterrupted electricity,” he said. 

“That is a demonstration of what happens when you execute, and it was very clear focus and everyone was rallied around it.”

Finance Minister Enoch Godongwana

The Governor previously applied this sentiment to the Reserve Bank when it was pressured to add addressing unemployment to its mandate.

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 it to explicitly mention job creation in its remit.

However, Kganyago told CNBC that the ANC’s plan to change the Reserve Bank’s mandate to include job creation 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.”


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