Rand stability depends on political developments post elections - Kganyago

South African Reserve Bank Governor Lesetja Kganyago. SUPPLIED.

South African Reserve Bank Governor Lesetja Kganyago. SUPPLIED.

Published Jun 6, 2024

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South African Reserve Bank (SARB) Governor, Lesetja Kganyago, has told Soweto residents that the decisions to be made over the next two weeks would determine economic stability and impact on the rand, as political parties negotiate coalitions or a government of national unity.

Kganyago’s comments come as business and investors remain uncertain about the prospects of the financial markets in South Africa after the general election did not produce a clear winner among contesting parties, forcing two of more to the negotiating table to form a government.

Engaging with the community at the annual Soweto Talk to the SARB Forum on Tuesday evening, in which discussions range from monetary policy to the inflation outlook, Kganyago said the impact of the election results was yet to be seen in whether the policies were sustainable.

Kganyago said that only political instability would have an impact on the performance of the rand.

“We are now in an environment of coalitions, perhaps it will be possible to have something that puts people first in the policies. We will leave that to the politicians, we at the Reserve Bank will continue to deliver on that mandate, irrespective of how our post-election politics plays out, whatever the outcome in the next two weeks,” he said.

“We are a democracy, a noisy democracy at that. We are a vibrant democracy and we have political contestations, but it cannot be said that we are politically unstable.”

Kganyago also addressed questions from a resident, Lesego Tau, who had concerns about the impact of undocumented foreigners on the rand and how markets and investors viewed the current “fiasco” in the political landscape.

He said the ratings agencies were looking at a variety of factors measuring economic and political stability including economic management, the settling of disputes, the processes followed to elect leadership, and whether policies from leadership were sustainable long-term.

“There are are the things ratings agencies are looking at and they are also looking at the polls last week and what the political configuration will be like,” Kganyago said.

He said the political leadership had to learn from lessons of the past that have been learnt through its history and be careful not to repeat mistakes that would be left to future generations to deal with.

“We cannot have policies that failed elsewhere and think that we can make them work.”

Responding to community complaints about lack of funding for township and rural based businesses, Kganyago also expressed concern that it was much harder to obtain funding for investment in the current banking system than it was for consumption.

Meanwhile, deputy governor a member of the Monetary Policy Committee, Mampho Modise, dispelled any doubt about the newly-enacted National Health Insurance (NHI) Act coming into implementation soon.

Modise said the NHI was meant for the basic governance of the health sector and public hospitals to meet private sector standards, improvements of infrastructure at main hospitals, and tightening of procurement policies, which currently saw items bought for 10 times less their commercial value.

“Once all that is in place, with private hospitals in private sector standards in public hospitals, then we can start looking at the implementation. It is not a bad policy but we still have a long way to go to implement it,” Modise said.

The discussions ranged from the resuscitation of the African Bank, which community members felt should be returned to its “owners“, the community.

“I think we have to look carefully at what we call a black bank. Whether eventually you establish it, a bank is a bank and the black bank has to play the same role as other banks. The question is how do we find the money to bring back the bank to its owners,” Kganyago said.

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