Politics critical to economic stability, says Reserve Bank chief

SA had to sort out its political problems to get structural reform going and unlock economic growth, Reserve Bank governor Lesetja Kganyago said on Thursday.

Speaking on the sidelines of a conference organised in London by the Bank of England, he said financial market inflation expectations seemed to be out of kilter with reality.

Kganyago said that he was happy with the Bank’s independence after a flurry of criticisms earlier in the year.

SA fell into recession in a year of corruption scandals, infighting between would-be successors to scandal-plagued President Jacob Zuma and the controversy over central bank independence.

He said politics remained the key to economic improvement, especially as noise got louder in the run-up to the ANC’s leadership contest in December.

The governing party is riven by fighting between factions backing Deputy President Cyril Ramaphosa and former AU head Nkosazana Dlamini-Zuma as leadership candidates.

“Politics is at the heart ... you can’t do structural reform unless there is political certainty,” Kganyago said. Lack of certainty had affected consumer and business confidence, the latter being at its lowest since 2014.

“There needs to not only be clear communication of what policy is going to be, but also implementation that demonstrates where policy is going, that will take the uncertainty away,” he said.

SA’s credit rating was cut to junk status earlier in 2017 by two of the top three ratings agencies.