Dr Lesetja Kganyago, Governor of the South African Reserve Bank (SARB), inspired hope for economic growth in South Africa and reiterated the importance of an independent SARB during a public lecture on Wednesday evening (06 March 2019) hosted by the Faculty of Economic and Management Sciences at Stellenbosch University (SU).

His lecture entitled, Independence and policy flexibility: 'Why should central banks be independent?', focused on the constitutional mandate and independence of the SARB, the implementation of monetary and fiscal policy coordination and inflation targeting as an expression of the SARB's mandate.

He expressed the importance of keeping inflation low, so it can help with economic growth and employment in the long term.

“We should by now be able to recognise the problem with allowing inflation to go up in ways that benefit some groups: The gain is temporary and costs other groups. Giving in to this desire, trying to conjure up temporary gains, lies behind many, if not most, historical instances of macroeconomic failure."

Dr Kganyago, who received the degree Doctor of Commerce (DCom), honoris causa, at SU during the December 2018 graduation, said that the losers of higher inflation rates are usually younger people, workers and the poor.

[In the photo above from left; Dr Lesetja Kganyago, (Governor of the South African Reserve Bank), Prof Wim de Villiers, (Rector and Vice-Chancellor at SU), Prof Johann Kirsten, (Director of the Bureau for Economic Research at SU)]

He believes that lower inflation will not only help these three most affected groups, but that in general the economy grows more strongly when inflation is low. “Without the power to demand higher compensation for inflation, the poor and those living off fixed nominal incomes; pensioners in particular, are most vulnerable. It is for these people, above all others that low inflation is both morally and economically right."

He also emphasised that keeping the independence of the SARB will be beneficial to the well-being of the country in the long term. “At the end of the day, central bank independence allows the SARB to hear what different interest groups have to say, but gives it the policy space to make decisions about inflation that on balance benefit all."

Kganyago is the tenth Governor of the South African Reserve Bank and he was appointed chair of the International Monetary and Financial Committee in January 2018, the first central bank governor from Sub-Saharan Africa to hold this post.

Watch the full lecture at this streaming link here. 

Photos by Anton Jordaan.