South African Reserve Bank governor Lesetja Kganyago warned on Tuesday that the country’s economic recession could deepen unless there was policy certainty on mining and agriculture, the two sectors that contributed to growth in the first quarter.
“At the moment these two sectors are facing policy uncertainty, which means we can go into an even deeper recession unless certainty is restored.
“The sooner the policy is clear the better it will be for our socio-economic well-being,” Kganyago told Parliament’s standing committee on finance in a briefing on the role of the bank and the outlook for the economy.
He said a mining company could not be expected to make a 30-year investment if policy changed every time a new minister was appointed in the portfolio.
“Ditto is you are a farmer and you must worry about the long-term. The same if you are a factory owner.”
Kganyago noted that South Africa and Venezuela were the only large economies currently in recession in spite of an upswing in the world economy. It meant that South Africa’s woes could not merely be blamed on the global economic climate but pointed to problems that were specific to the country.
“Our problems are idiosyncratic,” he said, adding that a decline in confidence in the economy may have been “exaggerated” by political events.
Kganyago was emphatic that the bank would act to preserve its independence, and noted that Public Protector Busisiwe Mkhwebane’s directive for Parliament to review the constitutional mandate of the bank raised eyebrows with fellow central bankers.
He recalled that her report was issued in May as he was heading for a meeting of the Bank for International Settlements and that reaction from his counterparts made it clear that it “did not help” to shore up wavering confidence in the local economy. Kganyago said central banks are not given to crying wolf and therefore it was worth noting that those in major trading partners have signalled that uncertainty was impacting on investor confidence in South Africa.
He stressed that those who may try to interfere with the mandate of the bank should “expect a fight”.
– African News Agency (ANA)
