Kganyago: Now's not the time to test policies that have 'proved a failure in economic history'

South African Reserve Bank Governor Lesetja Kganyago.
South African Reserve Bank Governor Lesetja Kganyago.
Gallo Images/Business Day/Freddy Mavunda
  • The central bank's governor says the Covid-19 pandemic is not the time to "venture into policies or instruments that have proved a failure in economic history".
  • Kganyago was addressing the bank's 100th annual general meeting on Friday on the SARB's response to the pandemic. 
  • The governor thanked Minister of Finance Tito Mboweni for his "spirited defence of the independent and integrity" of the bank. 


The Governor of the SA Reserve Bank, Lesetja Kganyago, has again defended the importance of the bank's independence, saying now is not the time to try out policies which have "proved a failure in economic history".

Kganyago was addressing the banks 100th annual general meeting on Friday morning, the first time the meeting has been held virtually.

The governor told the meeting that the bank expects the nationwide lockdown and impact of the Covid-19 pandemic to cause SA's GDP to contract by 7.3% in 2020, a larger slump than the 6.2% contraction during the Great Depression in 1931.

At the same that the governor was concluding his address on Friday morning, the Organisation for Economic Co-operation and Development (OECD), in a new report on the state of SA economy, said GDP growth could slump by up to 8.2% this year. 

 "This is not a time to despair. Neither is it a time to venture into policies or instruments that have proved a failure in economic history," Kganyago said. 

He did not specify which policies he was referring to. But over the past few years the bank has been locked in a debate between Kganyago and his allies - who view the bank's independence and mandate as sacrosanct - and some within the ruling ANC, who want the bank to play a more activist role in the economy in the belief that this could improve growth.

Kganyago said some of the steps the central bank has taken since the start of the pandemic include lowering the repo rate by 300 basis points, providing regulatory relief to improve credit flow, putting together a R200-billion loan guarantee scheme in conjunction with major banks, and injecting liquidity into the financial system.

In an apparent response to those that want the bank to take a more activist approach, Kganyago said improving the potential growth rate of the economy cannot be left to the central bank alone. Rather, the bank can help create the conditions that would allow growth to recover, in line with its mandate.

In his concluding remarks, the governor took time out to thank Minister of Finance Tito Mboweni for supporting the bank's independence, saying he understood central banking very well.

Mboweni is a former governor of the bank.  

"Your continued support and stewardship does not go unnoticed and is not taken for granted. Thank you very much, Mr Mboweni, for the support you have continued to provide to the SARB, but also, more importantly, of your spirited defence of the independence and integrity of the South African Reserve Bank," said Kganyago. 

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