Kganyago: SARB cannot be held accountable if 'other actors' can sway its actions

A central bank cannot be held accountable if "other actors" can sway its actions, SA Reserve Bank (SARB) Governor Lesetja Kganyago said on Wednesday evening.

He spoke at an event hosted by the University of Stellenbosch Bureau for Economic Research. Kganyago obtained an honorary doctorate from the university in December.

"If SARB had no independence then so-called 'better' objectives could be imposed on the central bank. But are these 'better' objectives just wishful thinking?" he asked.

"Maybe they reflect good intentions, but the test should be whether these objectives are right or even useful. It must be based on research."

He said that, as an institution, SARB works with government on how to best achieve the bank's mandate.

"We are at a time when our country is embarking on a course of political and economic renewal," Kganyago told the audience.

"In pursuing its mandate, the SARB must act independently and without fear and not cut interest rates just to accommodate someone, but to act in interest of society."

He emphasised that the SARB gets its mandate from the SA Constitution. It is to protect the rand in the interest of the public good.

"SARB's independence is about giving the central bank the institutional freedom to get on with our mandate," he said.

"It must be conditioned by a complementary framework to ensure transparency and accountability."

For him the real task of monetary policy is not to focus on the short-term, but to look at the long-term.

"At the end of the day, SARB's independence allows the bank to hear what different interest groups have to say, but to make decisions to reach its mandate in a balanced and transparent way," said Kganyago.

SARB's independence is also very important to avoid the sovereign from going bankrupt.

"Continuous fiscal deficits create a tax liability for citizens in the future - they create inter-generational inequity," he said.

"We cannot allow the excesses of today's generation to put a burden on our children and our children's children."

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