With me now on Moneyweb TV on the Executive Exchange is the South African Reserve Bank Governor, Lesetja Kganyago. Well, thank you so much for your time. I thought we should start with something slightly different today, Governor. And perhaps just to bring all of our listeners and viewers into the conversation is to get your day in the life of the South African Reserve Bank Governor in the current environment. What does your day look like? Can we start there?
Well, it's a life of uncertainty. And you wake up in the middle of the night or in the early hours of the morning and you try to check what has changed because it has an impact on what we got to decide on. And there are so many moving parts. But what we had been clear are the channels through which we think South Africa would be impacted. As the Central Bank, we clearly do not analyze the politics, we analyze the economics. And we say, 'Okay, there is a spike in the oil price. What does it mean for the global economy? What does that mean for South Africa? How is South Africa different?' And so every time there are factors that drive what happened to the oil price, I have to be on top of those and understand in which direction they are going. That's the one. The other channel, of course, is the exchange rate channel, which is impacted by capital flows. And I'm telling you this because you said how is it in the life of the Central Bank? And I am looking at these things before I even leave my house.
Now, how effective is domestic monetary policy when we look at those external inflation drivers? You mentioned the oil price that makes you wake up at midnight. Talk to me a little bit about the effectiveness of monetary policy in this polycrisis world, Governor.
Well, I would put it this way. We are in the middle of a global storm. You build the defenses before the storm arrives. You're trying to build the defenses in the middle of the storm, you are too late. And so let us look at South Africa and say where are we with monetary policy? And one will say to you that the South African monetary policy framework last year went through its most fundamental reform in 25 years. And it had to do with the lowering of the inflation target. And what that meant was that we got inflation expectations converging towards the target. That is a buffer that we have, which means that when the storms hit us and prices begin to rise, you have the cushion. And because you have got the cushion, you are also able to either see through the shocks and respond as appropriate. And so we have got a robust monetary policy framework where we had as the starting point inflation as target. You have a position where fiscal had put buffers and getting into the crisis, the fiscals had buffers. And you have in South Africa an environment where the structural reform program has progressed and has eliminated some of the constraints and we are making progress in terms of the ones that are lagging behind. And that laid the basis for South Africa getting into this shock to be able to weather through the storm. It doesn't mean we will not be affected. All that we are saying is that we are getting into this storm from a stronger position.
How big do you think this storm is going to be? Do you think it could be tantamount to a tornado?
Well, we don't have tornadoes in South Africa, so it's difficult for me to compare the storm and the tornado. All that I can say is that it is significant. And what are we seeing? We are seeing forecasters globally revising the forecast for global economic growth saying that the impact of this is that it's going to lead to lower growth. Secondly, that it is going to lead to rising inflation. And for us as Central Bankers our task is to understand the nature of the shock and whether the shock is of a transitory nature or whether it is of a persistent nature. If it is transitory, we see through the shock. And we only respond to the second round effects. If it becomes persistent or in the words that you put, a poly shock, if it becomes persistent, then you are having to calibrate policy differently and it has got to be timeously. And when I'm saying timeously, I'm deliberately using the term timeously because you can't afford to be preemptive, but you can also not afford to be late.
The indications right now, are they that this is transitory or do you think of a more persistent nature?
Well, as things stand, our reading is that it is transitory. But we also in the most recent policy meeting questioned that we have got to be able to be alive to the outlook, the risks attended to the outlook and be guided by incoming data. So as the data comes through, as we learn more and more about the crisis, our assessment of transitory or persistent could change.
Are you bracing yourself potentially for one of the bigger episodes in your term as Governor? I mean, you've been through many different crises. Where would you categorize this at this stage? Obviously, we know it's fluid, Governor, as you say and you're continuing to monitor. But is it one of the biggest?
Well, I can't say it is the biggest, but it is definitely big. I mean, when we were hit by COVID, for many of our generation COVID was the once-in-a-lifetime kind of a thing. The last time you had an impact like that was the Spanish flu in 1918. There are precedents for the oil shock. We had had it in the '70s. We had it in 1991-92 with the Iraq war. We are experiencing it now. And every time the oil price gets in at a particular level and then once you said, 'Oh, is that where it is? Is it locked?' Then it comes down. And what is different between this crisis and the previous was that the previous one, you had a spike in the oil price and then it was there for some time, then it came down. And here, there is a lot of noise that on any given day, there are indications that could drive the price up in the morning and by the afternoon, things are driving it down. And getting through to read that noise is what is challenging for forecasters and policymakers.
Beyond the drama that we're seeing on the ground and numerous petrol stations running dry, what is the reality in terms of oil supplies? Is there calmness that prevails at a policy level given what you are privy to and the conversations that you are privy to?
Well, we have not had the conversations with the department that is responsible for this. But we have been in engagement with players in the market. And there are emerging interesting trends. There is an indication that some of the stations and some of the suppliers are holding back on the stock because tomorrow they can sell it at a higher price. And so the indications that we are getting is not that at the moment. It might happen at some stage, but at the moment, we do not have a shortage of the product, but that the product is almost being held back somehow. And again, I'm saying this carefully because it is something that we cannot confirm. But this is what the indication that we are getting from some of the players in the industry.
Governor, I want to move on to a slightly different conversation at this stage. And that is to understand your leadership style within the South African Reserve Bank. Have people asked you how you classify your leadership?
