SARB Governor gives lecture at NMMU Business School

BY JESICA SLABBERT - SEPTEMBER 8, 2016

South African Reserve Bank Governor, Lesetja Kganyago, was in Port Elizabeth on Wednesday where he gave a public lecture about the influence of South Africa’s price setting environment on monetary policy trajectory at the Nelson Mandela Municipal University (NMMU) Business School.

In his lecture, titled “The influence of South Africa’s price setting environment on monetary policy trajectory”, Kganyago told local businessmen and academics that the South African economy has been slowing down since 2011 and that inflation has been drastically elevated in recent years.

He said that factors that have affected the South African economy include the immediate problem of food prices; the exchange rate; the labour and product markets that prevent prices from adjusting in line with economic conditions, and finally how they have operationalised the inflation targeting regime over time, which could have contributed to the inflation remaining high.

“We as society must aspire to a better set of economic outcomes than we have now,” described Kganyago.

He also provided ways that the banks and ordinary South Africans could help remedy these challenges – and explained why some of them could not be affected by anyone’s influence - like food prices being affected by drought.

“Since 2011, the South African economy has absorbed a 50% decline in the exchange rate of the Rand, without a major acceleration in inflation,” Kganyago described.

“Monetary policy can off-set some of the worse consequences of these problems, but it cannot singlehandedly get us out of this mix of low growth, high unemployment and high inflation.

“Monetary policy can only affect growth in the cycles, for South Africa to succeed we need to implement structural changes that are required, and the structural changes are well elucidated in our National Development Plan.”

Kganyago has previously expressed concern over the dispute between Finance Minister Pravin Gordhan and the Hawks, which saw the Rand take a dip in the wake of threats of the former’s arrest last month.