Daily Maverick columnist Stephen Grootes has selected South African Reserve Bank Governor Lesetja Kganyago as his Person of the Year. Kganyago's leadership in lowering the inflation target to 3% is credited with easing the cost of living for millions of South Africans. This move, building on 25 years of inflation targeting, promises long-term economic benefits.
South Africa faces numerous challenges, yet individuals like Lesetja Kganyago, governor of the South African Reserve Bank (SARB), continue to drive meaningful change. In a recent analysis, columnist Stephen Grootes highlights Kganyago's pivotal role in reducing the inflation target, a decision that will lower prices of everyday goods and improve lives for generations.
Inflation targeting was introduced in 2000 under Tito Mboweni, setting a range of 3% to 6%. This framework remained unchanged for 25 years despite economic shifts. Kganyago recognized this year as opportune for adjustment, amid declining inflation trends. For instance, new car inflation stands at 1.6%, while maize prices are expected to decrease due to the La Niña weather pattern. Additionally, increased Chinese exports of cars and solar panels exert deflationary pressure. The Bureau for Economic Research forecasts inflation below 4% for the next three years.
Kganyago's success also stems from astute political navigation. He needed backing from Finance Minister Enoch Godongwana, Democratic Alliance leader John Steenhuisen, and President Cyril Ramaphosa. The fragmented political landscape, including distractions within the EFF, MK, and Cosatu, minimized opposition. Kganyago publicly advocated for the change and directed the Monetary Policy Committee to aim for the lower end of the existing band to anchor inflation expectations—meaning workers would seek wage hikes aligned with lower inflation rates.
A brief tension arose when the Finance Ministry reaffirmed its authority, but it resolved quickly. In the Medium Term Budget Policy Statement, Godongwana announced the new target of 3%, with a 1% tolerance band on either side. This narrows the range significantly, making the SARB's task more demanding but committed to sustained low inflation.
Grootes praises this as a bold step that prioritizes public welfare over ease for policymakers.
