Reserve Bank governor Lesetja Kganyago. Picture: FREDDY MAVUNDA
Reserve Bank governor Lesetja Kganyago. Picture: FREDDY MAVUNDA

Reserve Bank governor Lesetja Kganyago rightly says that, given SA’s disastrous circumstances, now is not the time to experiment with policies that have “proved a failure in economic history”. Foremost on his mind is probably the temptation to try to mint the country out of trouble. It won’t work.

He is also right to say that “improving the potential growth rate of the economy cannot be left to the central bank alone”. SA’s circumstances have developed because of factors beyond the Bank’s control. The parlous state of public administration has developed out of a conscious politicisation of the civil service, both through the governing party’s cadre deployment initiatives and its refusal to confront the unions decisively.

The country’s policy environment has become a significant disincentive to trade and investment because ideological considerations have overwhelmed pragmatic ones. Racial empowerment policy has raised the costs and uncertainties of doing business while doing little for growth or for socio-economic upliftment.

The threat to property rights through expropriation without compensation does nothing for the land-reform malaise (in this respect, rather start with the land-reform bureaucracy), but is a red flag for investment. This applies to local and foreign investors.

The government’s response is to promise more of the same, along with National Health Insurance (NHI), infrastructure build and so on. A state-led recovery is likely to mean just the opposite.

The governor also notes that the time is at hand for “tough choices”. He is not alone in saying this, and probably means it. Whether his counterparts in the cabinet do is another matter.

Terence Corrigan
Institute of Race Relations

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