Reserve Bank of South Africa (Sarb) governor Lesetja Kganyago says current economic reforms alone will not be adequate.
Speaking at the Kgalema Montlanthe Foundation Forum held in Drakensburg, KwaZulu-Natal, Kganyago says current reforms must be accompanied by strong measures to grow the economy.
The Reserve Bank president says there is also a need for policy change to accelerate economic growth.
Kganyago adds that reforms are urgently needed in the country.
South Africa is undertaking a series of reforms in various sectors, including energy, telecommunications and ports.
The objective is to eliminate some of the bottlenecks that affect business activity in the country.
“Reform is urgent. Most of the effort should be focused on the microeconomics (reliable and affordable energy, functional transport networks, etc.). But these efforts will not succeed unless the macroeconomic framework is resilient enough to sustain growth. Reforms are difficult, but the pain of not reforming will be worse,” he explains.
Former Deputy Finance Minister Mcebisi Jonas on growing the economy using five steps during the Kgalema Motlanthe Foundation Forum:
Kganyago says the decisions of many central banks around the world to keep rates low for too long are also contributing to the challenges facing the global economy.
How this caused disruptions in global supply.
“The recent rise in inflation has something to do with supply-side factors, including the war in Ukraine and supply chain disruptions. But it’s not just a temporary shock due to exogenous factors. The policy settings of major central banks were very loose until 2021, which exacerbated the current problems. Tolerating excess inflation to offset previous lows and heating up economies meant there was no safety margin to absorb the stress.”
“Policymakers now regret these mistakes. To restore credibility, central banks are tightening up. The Fed will not repeat the mistakes of the early 1970s, when policymakers argued that higher inflation was due to supply-side factors they could not control, and eased policy quickly when economic conditions weakened.” adds the governor.
The bank is expected to raise rates again at its November meeting. There is a view among some experts that consumer inflation may peak.
In September, consumer price inflation eased to 7.5% from 7.6% in previous months.
Food and transportation were the biggest drivers of rising inflation, prompting the bank to raise lending rates.
The video below is reporting on the Kgalema Montlanthe Foundation Forum: