Governor Talks - South Africa: Monetary Policy After Covid

Location: Cedar Hall HQ1-1-660

Click here for the photos

REPORT

Key Points:

Mr. Tito Mboweni’s legacy and his impact on South African central banking. Tito Mboweni’s legacy in South African central banking is marked by his introduction of inflation targeting, elimination of costly foreign exchange interventions, and increased transparency and accountability at the South African Reserve Bank (SARB). He made the central bank accessible to the public. His policies not only transformed South Africa’s monetary policy framework but also set a standard for central banks in the southern Africa region.
Managing inflation amid global economic pressures. The SARB responded early to inflationary shocks in 2021, ahead of the advanced countries. SARB initiated gradual interest rate adjustments to reduce the risk of needing aggressive output-damaging measures later on. Adjustments to the monetary policy stance are based on the South African economic outlook, which however is influenced by advanced economy monetary policies and their implications for capital flows, repricing of South African financial assets, and exchange rate movements.
Balancing growth, macro stability, and exchange rate. Although growth and inflation risks are currently balanced, sustained reform efforts could shift growth risks to the upside. There is a need for both macro stability and structural reforms. The SARB treats the exchange rate as a shock absorber, allowing it to fluctuate with economic conditions rather than intervening heavily, while aiming to build reserves when opportunities arise.

Quotes:

“I think Tito would be remembered for his beautiful policy brain.” […] Tito would be known as the central banker who took central banking to the people.” Lesetja Kganyago

“We were able to take baby steps in the withdrawal of the accommodation and the view was that if we waited, we might just end up with a situation where we have to take very aggressive steps and that could come at the cost to output.” Lesetja Kganyago

“I'm afraid in the region there isn't much leaning against exchange rate movements, not because there isn't a willingness to lean, but because we just do not have the resources to lean against the movement in the exchange rate. You need lots of reserves to do that.” Lesetja Kganyago

Contributor: Aga Urbanowska

SPEAKER

Lesetja Kganyago
Governor of the South African Reserve Bank

Mr Lesetja Kganyago was appointed Governor of the SARB with effect from 9 November 2014. He was reappointed by the President of South Africa for a second five-year term effective 9 November 2019. He is the Chairperson of the Monetary Policy Committee, and the Financial Stability Committee. Prior to his appointment as Governor, Mr Kganyago served as Deputy Governor of the SARB from 16 May 2011 until his elevation to Governor.

Mr Kganyago chairs the Committee of Central Bank Governors of the Southern African Development Community (SADC), co-chairs the Financial Stability Board’s Regional Consultative Group for Sub-Saharan Africa, and chairs the Financial Stability Board’s Standing Committee on Standards Implementation. In addition, Until recently he served as the Chairperson of the International Monetary and Financial Committee, which is the primary advisory board to the International Monetary Fund (IMF) Board of Governors, from 18 January 2018 – 17 January 2021

Before joining the SARB, Mr Kganyago was the Director-General of the National Treasury. He represented South Africa at international organisations such as the World Bank, the IMF, the G20 and the African Development Bank. In this role, he served as the Chair of the Development Committee Deputies and also co-chaired a G20 Working Group on the reform of the IMF.

He holds an MSc in Economics from SOAS University of London and a Bachelor of Commerce degree in Economics and Accounting from the University of South Africa. He also received various training in Finance, Economics and Management.

MODERATOR

Abebe Aemro Selassie
Director of the African Department

Abebe Aemro Selassie is the Director of the African Department, where he oversees the IMF’s operations and engagement with 45 countries across sub-Saharan Africa.

Under his leadership the IMF has disbursed some $51 billion to support the post pandemic recovery and foster greener more inclusive growth. Working tirelessly alongside the region’s leaders Mr. Selassie strives to strengthen the region’s financial architecture and support Africa reaching its true potential.

Before taking up his current position in 2016, Mr. Selassie gained extensive experience in a wide-ranging career at the IMF. He held various senior positions, including Deputy Director in the African Department, Mission Chief for Portugal during the Euro Area Crisis and South Africa. He has served as the IMF’s Senior Resident Representative in Uganda and earlier in his career, he worked on the Fund’s lending programs with Turkey, Thailand, Romania and Estonia. While in the Strategy, Policy and Review Department he was deeply involved in low-income country and emerging-market programs and policy design issues.

Before joining the IMF in 1994, he worked for the Government of Ethiopia as Principal Economist in the Office of the President and at the Economist Intelligence Unit in London.