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Cape Town – South African Reserve Bank (SARB) governor Lesetja Kganyago admitted that the political uncertainty in South Africa weighs heavily on investor confidence.
Briefing Parliament’s standing committee on finance on the SARB’s mandate and the current economic climate on Tuesday, Kganyago said at the past two international meetings of central bankers he was asked “what was going on in South Africa”.
“And central bankers are often not worried, so clearly it (political uncertainty) has had an impact,” he said in response to a question from the Democratic Alliance’s (DA) David Maynier about the impact political uncertainty has had on the economy.
Kganyago said the SARB has always been regarded as a “beacon” in the international central banking sphere.
“Central bankers don’t cry wolf unless they’re worried. So the uncertainty is impacting on the confidence of investors – and it’s no longer just domestic,” Kganyago said.
READ: Lesetja Kganyago tears into 'reckless' Public Protector
The concerns expressed by the international community “emboldened” the SARB to challenge the findings of Public Protector Busisiwe Mkhwebane, who said in a report the bank’s constitutional mandate needs to be changed to achieve socio-economic transformation.
The North Gauteng High Court on Tuesday morning reserved judgment in the SARB’s urgent application to have Mkhwebane’s remedial action cited in her report set aside.
The bank argued in an affidavit that the Public Protector’s remedial action falls outside her powers and breached the separation of powers because it encroached on Parliament’s exclusive domain of law-making. It was also not related to the subject of the Public Protector’s investigation.
The SARB also pointed out that the remedial action was irrational and the process was unfair, as it (SARB) was not given an opportunity to comment on the constitutional amendment.
At the parliamentary briefing, Kganyago said if the Public Protector’s remedial action was to be adhered to it will have far-reaching consequences for South Africa’s economy.
READ: Rand under pressure on the back of Moody's report
He referred to a report issued by ratings agency Moody’s on Monday, which said the independence of the SARB has always been a strength in South Africa, but that it needs to reconsider if this is in fact still regarded as a strength or not.
“There’s something I don’t understand about South Africa,” Kganyago said, “and that is why the institutions that work are always under attack.
“The sooner this uncertainty is cleared the better for the well-being of the country.”
SA not following global growth path
Speaking about the macroeconomic situation, Kganyago pointed out that South Africa has not followed the renewed growth trajectory in the global economic sphere.
“In 2009, South Africa fell into a recession because of the global economy. But now that global growth is recovering we’ve fallen into a recession. That is an anomaly and it suggests that the problems are idiosyncratic and not because of weak global growth.”
At the moment, South Africa and Venezuela are the only sizeable economies that are in a recession, Kganyago said.
He warned that South Africa won’t create employment unless the economy grows by at least 3%.
READ: Reserve Bank cuts growth forecast to 0.5%
In 2016, South Africa’s economic growth dipped below its population growth, which means South Africans are getting poorer.
“More people are entering the job market than the number of jobs being created.”
Kganyago said if the economy grows at 3%, it means employment is created for every percentage of growth of up to 0.6%.
“It is, therefore, possible to have jobless growth, but you can never create employment in a contracting economy. For jobs growth the economy needs to grow.”
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