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SARB could play a far bigger role as stated in its mandate as SA bares the brunt of high energy inflation

Kuben Naidoo, the deputy governor of the SA Reserve Bank of South Africa and the head of the Prudential Fund, on Monday asked to resign. File photo

Kuben Naidoo, the deputy governor of the SA Reserve Bank of South Africa and the head of the Prudential Fund, on Monday asked to resign. File photo

Published Oct 25, 2023


Kuben Naidoo, the deputy governor of the SA Reserve Bank (SARB) and the head of the Prudential Fund, on Monday asked to quit, and his resignation added to rand weakness at the unexpected turn of events.

His resignation is still unclear at this stage, while it still awaits final acceptance by the President. The SARB, energy and the economy are directly inter-related.

Over the past 12 months interest rates have skyrocketed causing financial hardship to households and consumers. In contrast, during the Covid-19 pandemic interest rates were so low, it almost hit 0% at 3.5% at one stage in 2020.

But, since the end of the pandemic, we have seen interest rates climb at a marathon-like running pace. Today, the repo rate is so high that record payment defaults have occurred.

The current energy crisis and the load shedding reality South Africans have to face on a daily basis is adding to this harsh environment.

The levels of inflation are uncontrollable. So, it is a struggle for households to put food on table, pay for afford basic foodstuffs, then, on top of that, having to fork out for high fuel and electricity costs.

The role which the SARB plays is thus pivotal in the economy, with its core mandate to control inflation and prices.

Today, the repo rate is 8.25% since May, and the Prime rate is 11.75% since May, and producer price inflation is 4.3% since August, and consumer price inflation stands at 5.4% since September.

The Department of Treasury, under Finance Minister Enoch Godongwana, and the SARB, under Governor Lesetja Kganyago, have a responsibility to intervene in the economy.

Treasury provides the financial means to fund Eskom and avail capital to build brand new power stations and expand the grid.


The primary mandate of the SARB is to protect the value of the currency in the interest of balanced and sustainable economic growth.

It also has a statutory mandate to enhance and protect financial stability in South Africa.

The SARB is also responsible for:

- issuing and destroying banknotes and coin;

- regulating and supervising financial institutions;

- managing the official gold and foreign reserves of the country;

- managing the national payments system;

- administering the country’s remaining exchange rate control systems;

- acting as the banker to government; and

- acting as lender of last resort to provide liquidity assistance in exceptional cases.

The two last items in the list of responsibilities of the SARB are of prime importance, yet the most neglected relationship between the bank and the state.

The SARB, as ‘’acting as a banker to the government and acting as a lender of last resort to provide liquidity assistance in exceptional cases’’ must intervene and provide needed stimulus to grow the economy.

The SARB must fund the economic infrastructure of South Africa (SA) to build development programs as a banker and funder of last resort to the government.

The biggest challenge still facing SA is the much needed capital injection on infrastructure investment to build more power stations to expand the current 50 000 MW of Eskom's baseload capacity.

This is the direct interventionary role which the Bank ought to have been playing to support SA as a growing state. The current energy crisis could have been averted.

Money could have been made available through the Reserve Bank directed into the Treasury Department to fund the building of a brand new power station in SA. That is the direct developmental role the Reserve Bank should play in SA's economy. All other governments do that around the world.

There is, and there was no reason for SA to go and borrow money from outside international institutions like the Internal Monetary Fund and World Bank to build Medupi and Kusile when the SARB is the banker to the government and the lender of last resort to provide liquidity in exceptional circumstances.

Under the leadership of Kganyago, the bank has remained resistant towards intervening in bolstering economic growth and providing financial stimulus to the economy.

The bank played no role in rescuing the ailing economy during the pandemic. There were many calls for economic and financial stimulus, but the SARB sat back while watching the economy crumble.

Whereas in the US ,the Federal Reserve, over the past decade, kept interest rates low at the same time while it deployed trillions of dollars in stimulus and expanded its regulatory oversight.

So, Treasury, at times, has exaggerated its challenges over the years by taking unnecessary routes to resolving the capital and liquidity challenges by borrowing from foreign lenders in foreign currency denomination, which has resulted in SA’s high debt levels.

Of course, whenever this is discussed, it becomes a touchy issue because most economic pundits continue to claim that the only role played by the SARB should be that of maintaining inflation and the stability of the rand, when its mandate is much broader.

Kuben Naidoo

I tried to reach out to Naidoo to find out what were the real reasons and decisions behind his bid to resign. It shocked the country.

At the time of penning my column the outgoing SARB deputy governor had not yet responded to my questions.

Speculation was rife, and even questions on the SARB's internal leadership battle crisis were raised.

Most of us would like to know: Is there any chance that he may be the next group CEO of Eskom? If not that role, I am sure he is headed to an international bank or institution or some other prime executive position.

The key question is what will be the impact of his resignation on the overall performance of the rand and economy. We already know how bad energy inflation has been to the economy.

During September 2023, petrol increased by R1.71 and diesel by R2.81 per litre. In October, fuel is retailing 93 unleaded at R25.22 and 95 unleaded at R25.68, diesel 50ppm at R25.22, and 500ppm is R25.01 a litre of petrol and diesel.

The cost of 1 kWh of electricity is averaging at R2.50 per unit and increasing at an average of 30% year on year.

Is the SARB managing energy costs inflation? I don't think so.

The facts speak for themselves. The SARB hasn't been successful in containing inflation within reasonable measures. This, although statistically speaking, the SARB can claim that it is still within its target inflation rate.

The real inflation on basic goods and services have been growing at phenomenally uncontrollable rates. These increases and runaway energy inflation prices have a direct knock on effect on the growth of the economy and overall gross domestic product and economic performance.

We extend to Kuben Naidoo best wishes on his new adventure and another chapter of his life. He played an incredible role in restoring confidence in the ability of the youth to lead.

He was deployed by the ruling party and appointed to the SARB in the prime years of his youth and climbed the ropes to being appointed as deputy governor in his prime years.

He was then and still now the youngest and prime appointment in the Treasury and the SARB, and is one of our generation leaders who served us with flying colours and made us proud.

Crown Prince Adil Nchabeleng is President of Transform RSA and an Independent Energy Expert.

* The views in this column are independent of Business Report and Independent Media.