Kganyago's Best Governor award affirms SARB's good work - economist

Sarb governor Lesetja Kganyago. (Lisa Hnatowicz)
Sarb governor Lesetja Kganyago. (Lisa Hnatowicz)

Johannesburg – Reserve Bank governor Lesetja Kganyago has been named Central Bank Governor of the Year for Sub-Saharan Africa, an accolade which affirms the good work of the bank, according to an economist.

Previous governors who received the award from GlobalCapital include Tito Mboweni (2004) and Gill Marcus (2012). Kenya’s Patrick Njoroge won the award in 2016.

GlobalCapital commended Kganyago for staying committed to monetary discipline, which is needed to maintain investor confidence in uncertain times.

Speaking to Fin24 by phone on Monday, economic strategist Thabi Leoka said the award affirms the South African Reserve Bank's (SARB) work.

“This award affirms the good work the Reserve Bank has been doing, especially in such a turbulent time, economically and politically,” said Leoka.

She added that this also affirms the view of rating agencies of monetary policy as a strength for the country’s rating.

Beacon of strength

In a statement the Banking Association of South Africa (BASA) said that since his appointment in 2014, Kganyago had managed to reconcile the “competing demands” of his position while also defending the banks mandate.

“Kganyago has shown that rare trait among civil servants these days – courage and a willingness to fight for the integrity of the institution he represents.

“He is a beacon of strength and stability in government. We need more of this, in our central bank, national treasury, and right across the public sector.”

Further, the award shows the value value international investors place on policy certainty and institutional continuity, said BASA. “He is one of our best and brightest state officials and it is crucial that skills such as his be retained in our institutions.”

“We hope the award will embolden other state institutions to follow a similar path of principled operation in the best interests of the country.”

SARB has come under attack in recent months, with Public Protector Busisiwe Mkhwebane gunning for a mandate change from protecting the value of the currency to promoting the socio-economic wellbeing of citizens.

In August the Reserve Bank won its court bid against the Public Protector when Judge John Murphy ruled that  Mkhwebane's remedial action for the bank to change its mandate be set aside. In his judgment, Murphy said the Public Protector should reflect “more deeply” on her conduct regarding this particular investigation.

Investec Chief Economist Annabel Bishop added that the bank’s mandate to protect the rand by preventing high inflation is an effort to maintain macro-economic drivers needed for a stable economic system and not one heading for junk status. Being downgraded to junk would lead to a failed state, unable to make social welfare payments to the poor, she explained.

She went on to explain that removing inflation targeting would see a sharp rise in prices impacting the poor the most. “A high inflation environment, where inflation targeting is abandoned, would mean a rapid (likely double digit) rise in the cost of living, which the poor would not be able to afford, and would have to increasingly go without.”

Ratings agency Moody’s also noted questions concerning the bank’s ownership and calls for it to be nationalised, which were raised during the ANC policy conference in June. Zuzana Brixiova, vice-president and senior analyst of the sovereign risk group, said it is important to measure this against the extent to which it could impact economic growth.

On separate occasions, Kganyago has defended the independence of the SARB and its constitutional mandate.

“Ensuring price stability or low inflation is a traditional function of central banks. All central banks have this mandate in some form. If the central banks don’t do this, who would control inflation?” he told Parliament in August.

Speaking at a rates decision in July, Kganyago said that no president or finance minister could influence the SARB’s decisions.

But most recently Kganyago told Bloomberg that politics is adding to the complexity of the SARB's role. The bank was also taken aback by the fact that challenges to its mandate came from the Public Protector, he told Bloomberg.

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