Despite criticism, Lesetja Kganyago says the Reserve Bank can’t shift its focus from lowering inflation to more interventionist measures
Some economists and analysts have called for the bank to expand its existing mandate and use other monetary policy tools at its disposal to help pull South Africa out of its economic slump.
In fact, Kganyago added, the inflation-targeting era had been one of lower inflation and lower interest rates than prevailed previously. Inflation had been kept under control.The Covid-19 crisis struck at a time when South Africa’s economy was already vulnerable and technically in a recession. Real GDP had contracted at an annualised rate of 0.8% and 1.4%, respectively, in the last two quarters of last year.
A three-month repo facility, offered in addition to the weekly main refinancing operations, was introduced. The end-of-day lending rate on the standing facility was reduced from repo plus 100 basis points to the current repo rate. The Reserve Bank also began a programme of purchasing government securities in the secondary market.
She said there needed to be a level of elasticity and agility to respond to what was happening in the immediate context, and that monetary policy could not simply be about “slashing repo rates every now and again”.“The Reserve Bank should play an interventionist role in the economy. Even with its particular mandate, we can do much more than the bank is doing,” said Pheko.
“I’m not talking about the R350 for people who’re on social welfare or not on the grid. I’m talking about a dividend that would be a nonrepayable grant to citizens at a time when workplaces are under pressure to retrench. “The point of contention is who polices the Reserve Bank and to whom it’s accountable – its 750 shareholders. Even though they claim to be apolitical and depoliticised, there’s clearly a level of political manoeuvring taking place. That, in itself, is a political act and shows a far deeper, unseen machination,” said Pheko.
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