And I sat there and I looked at the minister of finance because I didn't know what. And then he just turned to me and says, 'You are on your own. Answer.' And then I started to answer and I was giving limited information. He says, 'You have more information than that. Provide more information. Why should a rich province benefit from this thing?' And so after winning the economic argument, after winning the legal arguments and so forth, a political decision was still taken. We are not going the e-toll route.
Trading of financial inclusion with stability is not quite a trade-off.
It's not quite. These are two important policy objectives.
This is a special moment. Governor, are you well? It is good to spend time with you. We've known each other for many years and I've tried to get you to have this kind of conversation. I'm happy we're having it today. I want to start where it comes from. We're going back from Alex Township to Limpopo now to Africa's most powerful central banker. What was that defining moment that set you on this path?
Difficult to say. What I could think of is something that stopped it from not happening.
I was at Wits and I wanted to switch from commerce to go and do law or sociology or politics and one friend of mine then said to me, 'You are out of order. One day we are going to run this country and we going to need people with commerce skills. You better stick to commerce.' So I stuck to commerce and I majored in economics and accounting and I thought I would be an accountant and I started at Barclays Bank as a clerk and worked for COSATU as an accountant and got unbanned. Worked for the ANC as an accountant and then I got this call that said that we have got enough accountants, can you switch to economics? And I never looked back.
So you know you were talking to young people about the context of policymaking and you using examples. Let me tease one example that I found fascinating. It was the policy environment around decisions around rolling out antiretroviral drugs in the country. Can you just give us a sense of the kind of policy thinking and issues and you know balances that had to be made for something like that?
So you would know that there was a political debate about whether these things should be rolled out and there was a scientific debate about toxicity in the antiretrovirals and then there was the issue of cost of these antiretrovirals. The government was fighting to do parallel importing so that they could get the drugs cheaper and all of that. And the treasury's role at the time and I was head of economic policy was a very straightforward one. We are going to focus on the economics.
And we had to do this study that showed the economic benefits of rolling out ARVs, what they would be. Cut a long story short, it was that it will extend life expectancy. The economy was going to grow less without antiretrovirals. By rolling out antiretrovirals, we were able to re-accelerate the economy because people will no longer be absent from work. They become productive and so forth and so forth. And that was in essence the study. But the study was now also flying in the face of politics because the politics was still contesting the rollout whereas we did this work that shows not only that the economy will benefit, that actually government can afford to roll out the antiretrovirals.
And why that became an important policy was that the study was there, it was in the treasury. We couldn't get it out. And it so happened that a member of parliament either knew or suspected the study exists and asked—we were tabling our annual report—and asked the question, 'Has the treasury done any study about the impact of AIDS on the economy and what are the findings of that study and whether you could share that study?' And I sat there and I looked at the minister of finance because I didn't know what. And then he just turned to me and says, 'You are on your own, answer.' And then I started to answer and I was giving limited information. He says, 'You have more information than that. Provide more information.' And that's how we got the information out. Cut a long story short, when I came out of parliament I had gotten a call from the presidency that said, 'Where is that study? We want to see it.' And the study carried. And the DG of health then, Ayanda Ntshaba, also asked for a copy of the study and the treasury and the department of health did a joint cabinet memo to get antiretrovirals rolled out. That's wow.
There's another one that you've teased out which is quite contentious because it was a big issue at the time, which is e-tolls. Can you again put us at the center of those policy considerations for you as a decision maker in that organization but also for its manifestation outside the organization?
Well, everything about the treasury at the time had to do with what is the evidence here and what could be done. What was clear was that the freeway network needed significant uplift and that what are we going to do? Here were the choices. Does the national government allocate more money to do the freeway improvement program? How do you do it? How do you allocate more money? There is an equitable share formula. They must share like all the other provinces using this formula. Then secondly was do you make Gauteng pay for it? Well, does Gauteng have enough resources to pay for this? The answer was no. Then the other was well users must pay, that the users pay. And the other thing that came was why don't you use the fuel levy to fund this, but the fuel levy is paid by everybody in the country. Why should a rich province benefit from this thing? And so we did that and we had to—when I talked about independence of thought and having evidence—we commissioned a study by the Bureau of Economic Research that showed the economic benefits of having the tolling.
But the point here, the leadership lesson was that there was political reluctance, right? Initially from the province, but it also happened that it went through so many political transitions that every politician either at the head of Gauteng would want to take a different stand, whether they are the MEC of transport or the premier, they would take those kinds of things. The point here was that the Treasury believed in the strength of its arguments that successive court battles that were taken all the way to the Constitutional Court, the Treasury won all of those battles. So after winning the economic argument, after winning the legal arguments and so forth, a political decision was still taken. We are not going the e-toll route. And that was, I don't remember how many years down, about 15 years down the line.
Let me bring you back to another one. You're now at the Reserve Bank and there is an institution of the constitution called the Public Protector who makes a finding that relates to the role and independence of the central bank and this is in the vortex of politics. What did that mean for you as governor and what stances did you take and why, and what leadership lesson arises from those actions?
Well, the point here was that there was already public contestation about the role of the bank and whether the mandate of the bank should be expanded and those debates were taking place. And between the treasury and the reserve bank we were at one. That the mandate is in the constitution. That is what—and the constitution is very clear. You can ask the reserve bank to do additional things. We do payments. We do prudential regulation. We do financial stability. But the constitution is very clear. All those additional things are subject to the primary mandate. They are subservient to the primary mandate and the primary mandate is price stability. So we saw the report of the public protector as muddying the water here because part of it was that report instructed parliament to change the constitution. And we said, but the public protector is a creature of the constitution. They do not have the power to say that the constitution must be changed and it had to be contested.
But the leadership lesson then there once again was that we had to fight legally through the courts. We had to fight in the court of public opinion through repeated speeches, engagements, speaking at conferences and so forth. And then politically had to rely on the ability of the minister of finance to take those battles. And guess what? As the minister of finance was taking those battles, what happens? The minister of finance gets changed. And it was a difficult thing because when we went to court, we expected the minister of finance to also file an affidavit in support of our application. The minister of finance was the last person to submit the affidavit and the affidavit he had to apply for condonement for submitting the application late. It was not said but our reading at the time was that the new minister of finance was reluctant to defend the mandate of the bank. But underneath the politicians are the technocrats and the technocrats had advised that you are going to have to defend that.
One of the things that comes through in your conversations with young people is the issue that you are always going to be making decisions in the context of uncertainty and also you might be making decisions without the fullness of data and information. Yet it is fundamental to have data and empirical evidence to make a good decision. Can you expand on that at the central bank how these things kind of manifest itself for you because you deal with all those realities?
