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SA must focus on economic growth

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South African Reserve Bank (SARB) Governor Lesetja Kganyago has urged South Africa to discuss vital reforms to rescue the country’s economic growth levels.

Kganyago made the remark while delivering a public lecture at the University of South Africa on Wednesday. During his address, the governor bemoaned that the country’s economic growth had regressed from previous levels of between 3% or 4% to the current 1%.

This economy used to grow at 3% or 4% a year, but now it grows at about 1%.

“Although central banking has a global reputation for being boring, in South Africa it has been getting a lot of attention. Much of this is welcome: it is largely a useful opportunity for improving public understanding of what the SARB does, while we at the SARB also learn and benefit from our interactions with people all over South Africa,” he said.

This comes in the wake of sections of society in recent times calling for the nationalisation of the SARB.

“As we in the SARB have tried to communicate: the growth problem in South Africa is mainly structural in nature, beyond the reach of monetary policy alone,” he said.

“So the growth effects of a rate cut are small. And if we as a country obsess about the SARB and monetary policy as the only answer to our growth problems, we will fail to discuss the difficult but vital reforms that might actually rescue us from our growth malaise.”

Kganyago further warned that failing to get that conversation about growth going has further repercussions.

“It feeds the notion that the SARB’s private shareholding matters to the policy framework we have and the decisions made on policy. And again, this shareholding debate is more damaging to our economy than it should be. It sends a signal to investors, both here and abroad, that our macroeconomic framework is at risk, making the cost of debt higher than otherwise and undermining confidence,” he said.

“Who loses from all this? One of the biggest hits is to indebted households and the beneficiaries of public spending, who pay the price for skyrocketing interest costs on our public debt as the resources to spend are squeezed.”

These very serious problems aside, he said, the fact that South Africans want to engage with the SARB and its mandate which is welcomed.

“Of course, not everyone agrees with us 100% of the time. A certain amount of disagreement is normal, in central banking, as in so many other things. Indeed, not only is public engagement and discussion of monetary policy appropriate. When it is based on evidence, it is something we encourage,” he said.

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