World Economic Forum
Kganyago digs in on central bank independence
Election fever and vacancies created by the departure of some members of the Monetary Policy Committee could be a chink in the armour
Reserve Bank governor Lesetja Kganyago has mounted another strong defence of the Bank’s independence, slamming election-driven “crazy ideas” that may harm investor confidence.
“Imagine if you are an investor sitting in London or New York and you want to invest money in SA, and you need to deal with these constant changes with what you think will happen to the institutions,” Kganyago said in an interview in Davos, Switzerland, where he was part of an SA delegation seeking to promote the country to international investors at the annual meeting of the World Economic Forum (WEF).
“You are going to say: maybe I should wait because I’m not sure what these guys are doing.”
Still, he was reassured by comments from President Cyril Ramaphosa and finance minister Tito Mboweni who reiterated, in the wake of the ANC releasing a manifesto earlier in January calling for policy makers to consider growth and employment when setting interest rates, that its independence is sacrosanct.
“I was concerned last year, and then I stopped being concerned because I thought the debate was settled. I got concerned again in early January and after the president and the minister had spoken, I stopped being concerned,” he said.
Debates about the Bank’s autonomy come at a sensitive time, with it needing to fill vacancies in the rate-setting Monetary Policy Committee following the retirement of Brian Kahn in 2018 and the impending departure of deputy governor Francois Groepe, who is due to leave at the end of January.
With deputy governor Daniel Mminele’s second five-year term running out in June and Kganyago’s expiring in November, the concern is that the governing party, under pressure to boost the economy and make inroads against an unemployment rate of more than 27%, may seek to influence the Bank by appointing more pliant officials. Kganyago reiterated that he was prepared to serve another term if Ramaphosa decided to reappoint him.
Kganyago would not be drawn on whether the ANC was seeking to have a say in the appointment of Groepe’s replacement, saying only that “the process is underway” and the Bank “would be grateful if the president could make an appointment by the time of the next MPC”.
The next meeting of the committee, which kept the repo rate unchanged at 6.75% in January, is scheduled for March 26-28. Most economists expect it to keep interest rates unchanged after a stable rand and lower oil prices helped push inflation in December to the mid point of its 3% to 6% target range.
Kganyago said the diversity of the Bank’s personnel needed to be improved and he would prefer for Ramaphosa to appoint a woman. Fundi Tshazibana, an advisor to the governors, is the only woman in the committee at present, and when she was appointed in 2016 she was the first one since Gill Marcus was replaced by Kganyago as governor in 2014.
Kganyago also signalled that the Bank was searching for a candidate to take Kahn’s place, saying he prefers an odd rather than an even number. Kahn’s retirement in September left the MPC with six members, fuelling speculation that Kganyago would have a veto in the event of a stalemate. While the committee was initially split on the decision to hike rates in November, he denied at the time that this had been the case, saying members had instead opted to debate further.
Kganyago said proponents of the Bank’s nationalisation did so without providing evidence why this expense would be justifiable in the light of the country’s other needs.
“Depending on the valuation used, nationalising the Bank could cost anything between R20m and R100bn,” he said.
“Whatever the figure, if [the] government had that money, which I know it doesn’t have, would it spend that money buying the Reserve Bank, or solving the electricity crisis, or putting it into education, or building a hospital or clinic? What would make this a priority compared to other areas?” "