Governor, South African Reserve Bank
What has Governor Kganyago done during his first five year term?
Governor Lesetja Kganyago, the 10th Governor of SA’s Reserve Bank was reappointed to serve a second five year term, effective November 9 2019. CNBC Africa’s Fifi Peters spoke to some of SA’s top economist to review Governor Kganyago’s first term.
About Lesetja Kganyago
Lesetja Kganyago, Governor of the South African Reserve Bank (SARB), has been active in public engagements over the past two months, addressing the economic impact of the Middle East conflict that began in late February 2026. On 28 May, the Monetary Policy Committee (MPC), which he chairs, raised the repo rate by 25 basis points to 7%, effective 29 May. Kganyago stated that the committee decided to increase the policy rate due to a "painful combination of higher global uncertainty and reduced disposable income," noting that oil prices had fluctuated around $100 per barrel and that the Strait of Hormuz was still largely closed. He described the situation as "the biggest jump in fuel price inflation in the history of inflation targeting" and said the SARB's priority was to prevent the shock from becoming persistent, reiterating a commitment to bringing inflation back to the 3% target. In a public lecture at Rhodes University on 1 May, Kganyago discussed the pitfalls of "looking through" supply shocks, arguing that central banks must manage second-round effects to prevent temporary price increases from becoming entrenched. He contrasted the current shock with the 2022 inflation surge, noting that South Africa entered this crisis with inflation at the 3% target, a restrictive monetary policy stance, and improved fiscal fundamentals. At the IMF and World Bank Spring Meetings in April, he warned that higher oil prices would translate into increased fuel and food costs, and that rising fertilizer prices posed an additional risk to food inflation later in the year. Kganyago also hosted the inaugural Tito Mboweni Memorial Lecture on 4 June, where he described the late former governor as a "giant in the world of policy" and noted that Mboweni would likely have had much to say about the rise of protectionism and attacks on multilateralism.
Transcript (28 segments)
✨ AI-enhanced transcript with speaker attribution
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Narrator0:09
He's the 10th governor of South Africa's Reserve Bank, the oldest central bank in Africa. His job is to keep inflation in check and the banking system sound. It's been a tough job for Lesetja Kganyago in his first five-year term. The economy has lost steam, unemployment has risen, and many struggled to get by. His critics say he could have done more to help the economy grow through lower interest rates, but his fans say he did enough and that he saved South Africa from the dreaded junk status by protecting the independence of the Reserve Bank. The government has appointed Kganyago for a second five-year term. But how do some of South Africa's top economists rate his first term?
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Analyst 11:00
He's been very favorably received by the markets and investors, rating agencies and the like. Certainly if you look at the way the international audience views the current governance, it's very favorable. He won the Central Bank Governor of the Year award in 2018, which is a big honor, and he's currently chair of one of the committees in the IMF, which again is a very big international honor. If we look at the outcome of what he's had to do, that's probably the repo rate and where that's gone. It's really been in a very narrow range over his five-year term. We operated in a very low economic environment here, so we haven't had a lot of demand threats to inflation.
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Analyst 21:57
If you look over the past five years, you can say Governor Kganyago coincided with some unique factors that were not there in the previous governance. For instance, the issue of the attack on the central bank, you have other issues such as African Bank being bailed out, VBS Mutual Bank. Those are some of the issues that were not there in the previous governance. To rate him as a person, I'd rate him quite highly, but as an economist, it's interesting really. The Reserve Bank and he certainly personally on behalf of the policy committee might claim to have stabilized inflation at relatively low levels, but it came at an incredible cost to the economy in terms of higher unemployment. The real reasons why inflation is low and stable is because of subdued wage increases in South Africa, a trend since 2016 for the rand to strengthen, which does the work for them every single time.
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Analyst 33:02
I think Lesetja Kganyago has been a fairly moderate Reserve Bank governor from a monetary policy stance point of view. We've seen small incremental moves, typically 25 basis point changes in the repo rate, whereas with Tito Mboweni we saw very substantial changes in the repo rate and there was a more erratic monetary policy regime in their time. And with Gill Marcus we certainly saw perhaps more of a dovish bias. But I think Lesetja Kganyago has been the right governor for the time. Each governor as they come along, they don't just stand still, they actually improve processes. For example, under the current governor we've had the introduction of the QPM, the Quarterly Projection Model, which again helps analysts understand exactly the way the Reserve Bank is thinking. Tito Mboweni came at a time which was sort of the caretaker over our honeymoon democracy period, and then Tito Mboweni came in. I think all of these governors were very distinguished in their career up to that point. Tito Mboweni was the Minister of Labour before that, he had a stint in understanding the Reserve Bank. Lesetja more recently was the Director General of National Treasury, earned his stripes there, he also was a deputy governor for three years. Gill Marcus had a lot of experience in that financial sphere, she was also chairperson of Absa, director of Gold Fields.
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Analyst 44:34
I think Gill Marcus was the best governor we ever had, quite frankly. And the simple reason for that is that she struck the balance between combating inflation and preserving growth during her term of office. The real prime rate was 3% on average, and we had real growth on average of 2.6%. And when she departed, the new MPC members who were to the best of my knowledge appointed by Mr. Zuma decided to raise the real prime rate by 100%. It's now 6%. This is crazy, this defies logic, and predictably growth went nowhere.
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Analyst 55:16
I think the decisions the Monetary Policy Committee makes is not an individual decision, it's a decision of a committee. So essentially to assess Governor Kganyago as the only person that makes those decisions would be a little bit misguided. It is the decision of the committee. Their mandate is one of price stability, obviously in the interests of balanced growth and development in the country. And to that extent, we have seen inflation trend within the target band of 3 to 6%. So by and large, they have achieved their mandate well. I think particularly over the last five years, we've had the ongoing volatility of the rand, high food prices, how that impacted inflation, but generally we've got it under control.
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Analyst 66:03
I did a calculation of the extent to which South Africa's real repo rate, repo adjusted for inflation, exceeds that of our trading partners. Most of our trading partners, the average is 250 basis points. So quite frankly, 25 basis points two months ago, yes, thank you very much, but we need a lot more. We need to bring down our interest rates eventually by at least 200 basis points, that's two full percentage points.
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Analyst 76:31
There will be critics, but one must always bear in mind that much lower interest rates carry the risk of much higher interest rates later, which to some extent is what happened to us. For example, if you go back to 2004, 2005, interest rates were cut because of a low oil price, and later on we experienced those exceptionally high interest rates in 2008, which then led to a severe recession in 2009. I think given the weakness that we've seen in the South African economy, he certainly was sufficiently hawkish. There was no need to be more hawkish than he was. And in terms of being dovish, well, the risk is that if you rely on interest rates early to power your economy, to power you can emit growth and nothing really happens, well you run the risk of cutting and cutting and cutting and getting yourself into a position where your interest rates are so low that they no longer offer a good risk premium between ours and those of risk-free investments such as the United States Treasuries. And I guess also as a new governor, you don't want to fall behind the curve. That's always your risk as a governor, that inflation gets out of control and you should have moved, or you kept rates too high for too long and you strangled the economy and it was partly your fault that demand is down.
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Analyst 87:50
It would be great if they could have a relook at the Reserve Bank's mission statement. It's very clear that any central bank in the world needs to formulate monetary policy in consultation with National Treasury and the partner industries, because the mission says yes, keep inflation low, that monetary policy mission, but in the same sentence, make sure that we have sustainable growth and job creation. And I've missed that second part. He has done extremely well on providing us with this more stable financial environment from a domestic point of view by protecting the belly of the rand. We don't want to go down the path of Zimbabwe as a worst case example where you do see a loss in independence of the governance of the central bank and other areas. Granted, the debates on what is the benefits of a monetary policy independence relative to an independent central bank, I think it's a healthy debate. There is a lot of evidence globally on what is the impact of a central bank that is not independent, where political office bearers have a significant influence. You can look at Turkey for instance. We know from 2018, the Central Bank governor was fired because he didn't want to cut interest rates per that country's president's instruction. But what followed then was a significant weakening in the currency, which also led to a significant increase in inflation, and then that hits the poor citizens directly. Such is the impact of a non-independent central bank. The Reserve Bank indeed has been seen as a bastion of support for the credit rating. And if we were to see a loss of the independence of the Reserve Bank's ability to manage monetary policy in other areas, then we would likely see a credit rating downgrade.
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Analyst 99:44
I would agree with what is generally being said by the Reserve Bank, and that is a lot of the problems are more structural and demand fiscal and industrial policy solutions. But on the monetary side, clearly we are seeing a lot of experimentation internationally. I'm not suggesting we must go that route, but clearly there will be more demands made on the central banks. If you were to ask economists in confidence, because many economists work for financial institutions and can't be seen to be too opposed to Reserve Bank policy, but if you ask them in confidence what they would prefer: a 5% inflation rate and 3% growth, or the current scenario of a 4% inflation rate and zero growth? No rocket science, that's a no-brainer. We need growth in South Africa, and I must get this message across. A big worry is as the fiscal financial situation deteriorates and the SOEs do not manage to turn themselves around, the pressure could well rise in terms of greater impetus for higher electricity tariff increases, which in turn is very inflationary. It will push up the inflation rate significantly and make it much more difficult to cut interest rates. The potential for a credit rating downgrade still remains with us, and those are some of the reasons the SARB would have to continue to be cautious, because if we get downgraded, we're likely to see the currency weaken quite significantly. He's got a very good start to the next term from an inflation point of view. I think if you can just keep it in the range for his term and we can go by quietly and the Reserve Bank stays independent, I think we can give him a tick for that.
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Analyst 1011:29
We're no longer talking increased globalization. We're talking a lot of trade wars between the US, China, and pretty much any other country in the name of national security. But it seems as if tariffs are being used as a tool to achieve policies that have nothing to do with economic performance necessarily. But that has implications for financial markets because it results in increased volatility in markets, which of course does impact on our dollar-rand exchange rate, which enters directly into how the SARB makes decisions on monetary policy. I think they must just be a little bit more relaxed when it comes to volatility in the exchange rate. During Gill Marcus's term of office, the CPI went above the 6% top benchmark on more than one occasion. She did not panic. She had a good look at what was the cause. She realized that rising interest rates is not going to solve a temporary politically induced depreciation of the currency, and she kept the real prime rate at more or less 3%. And I think that's the message today: relax, have a cup of tea. I think his first term has been very, very well conducted, and let's hope that we can have that same sort of consistency over the next five years.
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Narrator12:51
After the break, we hear from the man himself.
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Interviewer13:08
Governor, thanks much for your time. Just looking back at your first term as SARB governor, how would you rate your performance and that of your team?
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Lesetja Kganyago13:17
I allow the South Africans to be the judge about how we have performed. When I came into this position, I spelled out two important things. One, it was that I would like to spend time embedding the South African Reserve Bank's financial stability mandate. And secondly, that I would like to focus on making the South African Reserve Bank an employer of choice amongst young people who would like to pursue a career in economics and finance. Just recently, we have been rated a top employer, after a big global IT company, as the best employer in South Africa. And that suggests that we have made progress from that time. The financial stability mandate, we have had the chief legislation coming into effect on the first of April last year. We have been quick off the mark as the South African Reserve Bank in the implementation of the Twin Peaks legislation. We are quite ahead of the other peaks. So one can look back and say that yes, in terms of the two big things that I had set ourselves to achieve, they have been dealt with.
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Interviewer14:44
And why did you say yes to a second term?
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Lesetja Kganyago14:47
Because the South Africans were insisting that I must do a second term. I have had a good time at the bank. This is not a job you apply for; the job you get requested to do. And in this era, it looks like South Africans like sending other people, and I have been sent as well. And I said that if you send me again, I will do it. And that is why I will do it, and do it to the best of my abilities.
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Interviewer15:25
Unlike your predecessors who governed monetary policy in the heydays of economic growth in South Africa, your term has been characterized by very little, if any, growth. There's been state capture, and more recently we're talking about trade wars. For you, what do you think was the biggest challenge you faced in the past five years?
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Lesetja Kganyago15:47
Well, the recovery from the global financial crisis is still not complete, even for the rest of the world. It's been a big challenge for the central banking community. And the second big challenge had to do with building a financial system of the future. The financial sector that we had going into the global financial crisis is not the financial sector that we would have, even if people talk about normalization. The normal is not going to be what we had just before the global financial crisis, because that was not normal. What we have now globally is that the core of the financial system is much more resilient than it was prior to the crisis. And South Africa was fortunate because we entered the global financial crisis with a well-capitalized, well-regulated financial sector that actually stood us in very good stead. And the other global issues, trade issues, is something that has just emerged. And this trade tension, trade protectionism, is not in the interest of the global economy.
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Interviewer17:11
Your term was also characterized by the collapse of African Bank, there was the December 5th 2015 incident where we had an abrupt change in finance ministers, and more recently the collapse of VBS Bank. But December 5th 2015, when you saw the rand go into a tailspin, when you heard of what had just happened, where were you that day and what were you thinking?
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Lesetja Kganyago17:40
I was actually going through my academic literature, preparing for that. This is the time I can catch up with the academic literature. And I got a call from Minister Nene's chief of staff, who said, 'I don't know if you have heard, but the Minister has just been removed.' I jumped into my car and drove to his house. By the time I had got to his house, the rand had moved big, big figures. And the day that followed was not a particularly nice day either, as the uncertainty continued. The next day, I left for a break with the family, and my son said to me, 'Are you sure you want to come with us? I have a sense you are going to be called back.' And true to form, I got a call on the Sunday night to say that I must come back because a new Minister of Finance was being appointed.
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Interviewer18:47
Some say the best decision that the former president of South Africa, President Jacob Zuma, made was to appoint you as governor in 2014. What was your relationship with the former president like?
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Lesetja Kganyago18:58
Relationships between presidents and central bank governors have got to be on a very sound footing. And I can say that I observed this when I was in the Treasury, about the relationship between governors in the day and the president. South Africa is very fortunate that none of the presidents of post-apartheid South Africa have interfered with the Reserve Bank. The former president would call me and ask me for counsel in terms of economics, to say what is happening in this economy. We would meet regularly and talk about the economy. Not once, not once would he say to me, 'I think you must do this this way, you must do this that way.' And that has continued. It started from Mandela through Mbeki, through President Zuma, through President Ramaphosa. The Reserve Bank has not felt that we are under political pressure not to do the things that we are supposed to do as an institution.
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Interviewer20:09
But there have been growing calls from other corners for you to cut rates or play a bigger role in economic growth in this country. Has that influenced any decisions that you have made, particularly recently?
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Lesetja Kganyago20:22
We are technocrats, and we are principled agents of our society. The decisions that we take have got to be informed by rigorous analysis. That rigorous analysis will not just involve the theoretical underpinnings of what policies you adopt, but also what evidence do you have to back up the decision that you make. We make our decisions based on our own processes. And quite frankly, in the run-up to the meeting, 10 days before the meeting, I don't even bother to read analysts' reports. I focus on what the staff of the bank has to say, and I go through that thoroughly and prepare myself for the meeting. If ever I was to cower to market analysts saying this must be done, or to any politician saying that this must be done, then I would have to vacate office. Because you see, that means that I am not living true to what the Constitution asks. The Constitution says, in pursuit of our mandate, we must act independently, without fear, favor, or prejudice. Incurring to that noise would mean we are not living through to that constitutional obligation.
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Interviewer22:13
The former chair of the Fed, Paul Volcker, has got this nice line in his memoirs about politicians. He says that you must hear them but don't listen to them. Do you ever think you made a wrong rates call in the past five years?
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Lesetja Kganyago22:34
Hindsight could always be perfect. I have looked, and I think that the easiest thing would have been that you ask somebody so that you look at yourself in the mirror. There is a paper that has just been published by you and wider, one of the authors is a professor at the University of London, Lawrence Harris, who has evaluated the conduct of monetary policy in South Africa over the past while. And he has actually established that during that period, the Reserve Bank had demonstrated that it had been sensitive to both growth and employment in the execution of its mandate. So so far, the evidence says that we have done the right things. Maybe five years later, with the benefit of more information, you might look back and say maybe that one was right, maybe that one was wrong. But unlike fiscal policy, where the poor fellows in the ministries of finance can make the call only twice during the budget, we have the benefit that we meet every two months and we can refine our policy stance as information becomes available.
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Interviewer24:00
What are you looking forward to the most in your second term?
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Lesetja Kganyago24:04
My second term is not going to be materially different from the first one in terms of what we have set ourselves to achieve. But I would like to embed the Reserve Bank in the South African society, so that the conversations about the role of the Reserve Bank are actually informed by evidence rather than by noise. That we could have a constructive engagement as South Africans about the role of institutions. Because as we have seen, if you do not have checks and balances, institutions can go pear-shaped. And in some instances, institutions can get gutted. Having credible institutions is one thing; populating those institutions with competent and ethical people is another. And it is a very, very important consideration that gets taken for granted. That even when an institution is under attack, the defense should be the incumbents who are able to stand in society and have the respect of society, who would be able to stand up and protect the institutions. And sometimes protecting the institutions could entail maybe I am the problem. And if I am the problem, in the interest of the institution, maybe I should be stepping aside. Fortunately for an institution like the Reserve Bank, the collegiality that we have, of constant counseling of each other, ensures that when one of us makes a mistake, there is always someone who would say, 'Be careful of this.' The institution is bigger than all of us.