After the Bell: Targeting Lesetja Kganyago — our incoming national sport

Daily Maverick

11 hours ago

SA Reserve Bank Governor Lesetja Kganyago is doing what a few other people in charge of important institutions are doing. He is daring the politicians to stop him. And he knows with utter certainty that what he is doing is right. But there is a problem. A huge problem.
I couldn't quite believe my eyes and my ears while I was watching SA Reserve Bank Governor Lesetja Kganyago last Thursday.
I actually had to check with a colleague, who is much more knowledgeable than myself, because I almost thought the universe had caught up with me and I didn't really understand what had just happened.
But live, on TV, Kganyago had just announced that the Monetary Policy Committee would target the 'lower end of the inflation target'. In other words, Kganyago has decided that we will have a 3% inflation target.
And just as we heard so much of the phrase 'uncharted territory' in the days after the DA's rejection of the Budget, so we heard rather a lot of the word 'unilaterally' after Kganyago's announcement.
I have a huge amount of sympathy for the governor.
I mean, can you imagine being in his position, watching all of the numbers lining up for a historic opportunity, to lock in lower inflation for generations to come. Knowing that the stars have aligned celestially to make a long-held dream come true.
Only to know, with that horrible feeling you get in your stomach as your child points their handlebars at the rugby post, that here on Earth our politics is so broken it just cannot happen.
In a better universe, perhaps in a better time, there would have been a fairly simple argument.
Some in the ANC, including I'm sure Finance Minister Enoch Godongwana, would have been able to manage this process, caress it along, speak to this person and that person, make sure that person is out of the room (and preferably out of the country) for this meeting…
Distracted
And in the end, so long as some in the ANC were kept quiet, or distracted by the vital national debate between Coca-Cola and Kingsley Cola, it would have gone through.
No longer.
Instead, one can imagine Julius Malema arguing nonsensically that the SA Reserve Bank must be 'nationalised'.
The ANC is hopelessly divided, while the DA will probably run a mile from the argument at this point.
God knows what the MK party would do, but I'm fairly certain that Colleen Makhubele would be on hand in Parliament to stuff it up.
So, this means that Kganyago is doing what I think a few other people in charge of important institutions are doing. When the politicians have lost all legitimacy and authority, some people in those positions have a lot more freedom.
In some cases (think Edward Kieswetter at the SA Revenue Service), they do the right thing. In others, (think Collins Letsoalo at the Road Accident Fund), they do whatever they want.
I think Kganyago is in effect daring the politicians to stop him. And he knows with utter certainty that what he is doing is right. But even with that certainty, I'm sure there's plenty to keep him up at night.
There is a problem. A huge problem.
The people who have to live under this, you and me, have not been properly consulted. Normally, people who represent us, someone who is elected, would make the decision.
Godongwana has not made the decision; Kganyago has.
Now, for the moment, it may not matter. Inflation is low, the decisions of the Monetary Policy Committee will be broadly in line with what it would have done anyway.
But that won't last.
You and I both know that Eskom is not done with price increases.
Just as we all know that Joburg is so broken that it is going to try to gouge as much out of us as it can, while Cape Town seems intent on doing something similar.
In other words, basically everything you pay the government for is going to go up by more than inflation.
And this is where the pain is going to come from.
To hit 3%, the Monetary Policy Committee will have to keep rates tighter for a long time. Just as the full consequences of US President Donald Trump's tariffs are being unleashed on the world.
I wonder if Kganyago has factored in all of that.
In the firing line
None of the politicians is going to go out to bat for higher interest rates right now. Instead, the SA Reserve Bank will be the institution in the firing line. As the governor, he will be the symbol.
Former Reserve Bank governor Tito Mboweni, who left us decades too soon, once told a gathering that he was amazed to find there was a helipad on top of the SA Reserve Bank building in Pretoria. It was put there by the previous regime in case a governor ever had to be taken out in a hurry.
Presumably, there was a military base in De Aar or something that they would be taken to, should Pretoria ever fall to the communists.
Kganyago might find that unexpectedly comforting.
Unfortunately, the image of the SA Reserve Bank could not be restored from De Aar.
And neither could the whole idea of inflation targeting. And this is surely the huge risk — that by going this route, the political backlash becomes so big it doesn't just claim Kganyago, but the entire idea of using interest rates to lower inflation.