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Quantitative easing is not an option for South Africa’ – Kganyago

By Investec 7 June 2019
Caption
Reserve Bank Governor Lesetja Kganyago during the monetary policy committee media briefing on Janaury 17, 2019 in Pretoria, South Africa. (Photo by Gallo Images / Business Day / Freddy Mavunda)

In a week of economic and political turmoil, Governor of the South African Reserve Bank, Lesetja Kganyago made it very clear that the sole mandate of the central bank was to maintain price stability.

During a week in which South Africa’s Q1 GDP hit a 10-year low, the economy received a further shock after ANC secretary general Ace Magashule told reporters that the governing party’s NEC had resolved that the Reserve Bank’s mandate should be expanded to include growth and job creation.

Sitting on a panel moderated by Nozipho Mbanjwa, Governor Kganyago; political journalist, Ferial Haffajee; and Investec’s Chris Holdsworth gave their views on the current economic and political turmoil.

“Quantitative easing is not an option for South Africa,” said Kganyago who pointed out that the country’s interest and inflation rates are too high for it to work here.

Quotes from Governor Lesetja Kganyago on why SARB’s mandate cannot change:

“Institutions in a democracy matter and quality institutions matter even more.”

“Institutions have been systematically weakened and in some instances gutted.”

“You cannot beat an economy that is on its knees and force it to create jobs, it’s not going to happen. You have got bring it up, get the economy to grow – jobs are an outcome of economic growth. Absent economic growth you can’t have jobs.”

“You don’t ask the SANDF to go and shoot down inflation, their task is to protect the territorial integrity of the South African border. The judiciary is responsible for the administration of justice, you don’t ask the judiciary to go and create jobs, that’s not their job.”

“We created the SARB in terms of the constitution and tasked it with protecting the value of the currency in the interests of balanced and sustainable growth. That’s where the mandate is derived from. You do not ask the SARB to administer justice, we are not designed for that.”

“If you read the report of every rating agency, whether they have decided to keep our rating the same or when they downgraded us – they only decided to downgrade us this much, they said the one thing that saves you is the strength of your institutions. And the first thing we do is to attack those institutions. So,  what are we saying? We want to destroy our own strengths in our own credit worthiness.”

“Quantitative easing is not an option for South Africa because you do not meet the conditions for quantitative easing.”

Governor Lesetja Kganyago on growth:

“We will not be able to have balanced and sustainable growth in the Republic if you don’t have price stability.”

“You cannot beat an economy that is on its knees and force it to create jobs. You’ve got to bring it up, get the economy to grow. Jobs are an outcome of economic growth, absent growth, you can’t have jobs.”

“The ratings agencies have said ‘the one thing that saves you is the strength of your institutions’, and what is the first thing we do? We go and attack those institutions.”

This article appeared on Investec’s FOCUS

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