Tighten your belt and let Kganyago get on with it

Except for those with large bank deposits, a great many of us are battling to keep our heads above water. With the repo rate seemingly stuck at a 14-year high of 8.25%, consumers are living through tough times. And the picture is hardly likely to improve any time soon. But don’t blame the South African Reserve Bank for that. Its inflation-targeting regime has long been a source of contention, often getting all the blame for the interest-rate pain the country is enduring. Claims that inflation-targeting is a First World mechanism have been sharply rejected by the Bank’s governor, Lesetja Kganyago, who is now in a third five-year term.

His reappointment suggests the government has faith in his work and outlook. It has good reason to.

Kganyago has pinned his reputation on slaying the inflation dragon. The news this week that inflation in March eased to 5.3%, better than the February figure of 5.6%, might have raised hopes that rates would be coming down soon. Alas, the governor is not happy, insisting that the Bank wants inflation to be “anchored” at about 4.5%.

Confident predictions last year that the hiking cycle was at an end and that the next move in the repo rate would be downwards have given way to a more realistic assessment. Now, the cut is being pencilled in for later this year or perhaps only next year.

Kganyago’s comments last year, that high rates do not affect the poor as much as inflation does, make economic sense but came across as unfeeling. But for as long as the politicians demur on making the structural changes necessary to get the economy on a higher growth path, it will be left to him and other senior bureaucrats to make politically unpopular choices.

With FNB now warning of a recession later this year, and political pressure building, Kganyago will feel ever more heat. But with inflation trending down in a world of rising prices and greater scarcity, the record suggests it’s best to let the governor do his work without political distraction.

And if that means higher interest rates for now, and less conspicuous consumption, so be it.