Lesetja Kganyago, governor of the South African Reserve Bank (Sarb), says current economic reforms alone will not be enough.
Speaking at the Kgalema Montlanthe’s Foundation Forum in Drakensburg, KwaZulu-Natal, Kganyago said the current reforms must be accompanied by strong economic growth policies.
The Reserve Bank governor says a change in policy is also needed to accelerate economic growth.
Kganyago adds that reforms in the country are urgently needed.
South Africa is enacting a range of reforms in various sectors including energy, telecoms and ports.
The goal is to remove some of the bottlenecks that are hampering business operations in the country.
“Reform is urgently needed. Most of the effort should focus on microeconomics (reliable and affordable energy, working transport networks, etc.). But those efforts will not succeed unless macroeconomic conditions are robust enough to sustain growth. Reform is difficult, but the pain of not reforming will be worse,” he explains.
Former Deputy Finance Minister Mcebisi Jonas on economic growth in five steps during the Kgalema Motlanthe Foundation Forum:
According to Kganyago, the decisions of many central banks around the world to keep interest rates low for long periods also contribute to the challenges facing the global economy.
As this has caused global supply disruptions.
“The recent spike in inflation has something to do with supply-side factors, including war in Ukraine and supply chain disruptions. But it’s not just a temporary shock due to exogenous factors. The major central banks’ monetary policy guidance was too easy going into 2021, compounding the current problems. Tolerating inflation overshoots to offset previous undershoots and letting economies run hot meant there was no longer a safety margin to absorb stress.”
“Politicians now regret these mistakes. To restore credibility, central banks are now tightening. The Fed will not repeat the mistakes of the early 1970s, when policymakers argued that higher inflation was due to supply-side factors beyond their control and quickly eased policy as economic conditions deteriorated,” the governor added added.
The bank is expected to hike rates again at its November meeting. Some experts believe consumer inflation may be peaking.
In September, consumer price inflation fell to 7.5% from 7.6% in the previous months.
Food and transport were the biggest drivers of rising inflation, prompting the bank to raise lending rates.
The following video reports on the Kgalema Montlanthe’s Foundation Forum: