Daily Maverick columnist Stephen Grootes believes SARB governor Lesetja Kganyago deserves to be named Person of the Year for his bold move to lower South Africa’s inflation target — an achievement set to ease the cost of living and benefit millions of South Africans for years to come. While our country often gives the impression it is beset by impossible problems, it is also blessed with exceptional people. As they make their contributions in different ways, very few can claim to have driven a process that will lower the prices of goods that you buy.
A decision that should improve lives for generations to come. Lesetja Kganyago is my pick for Person of the Year. It is probably in the nature of a central bank governor to treat inflation as the enemy.
But importantly, to be sensible about it. As any Japanese citizen can tell you, without a little bit of inflation your economy will not grow. The trick, of course, is to get to the right level of inflation that both creates economic growth, and yet doesn’t put too much pressure on the poor (who suffer the most when the price of bread goes up).
Read Full Article on Daily Maverick
[paywall]
Of the many, many contributions to our society made by Tito Mboweni (who passed away just over a year ago), one of the most important was his leadership when the SA Reserve Bank (SARB) adopted inflation targeting in 2000. At the time, considering the nature of our economy, the bank was told to target an inflation rate of between 3% and 6%. While so many other things changed in our country, that held for 25 years.
It is surely a comment on his genius as an economist that Kganyago realised that certain dynamics were coming together that meant this was the year he could achieve his dream of changing that target. That this was the time to strike to keep inflation lower for longer. While the last five years have shown we live in a surprising world, this year has seen inflation coming down.
Several of the big talking points of this year demonstrate that. The braai and beer chats about Chinese cars reflect the fact that new car inflation is just 1.6%. The kitchen and wine discussions about food prices show how maize prices are likely to come down, partly as a result of the current La Niña season.
As China continues to increase its exports to export more and more toemerging markets, so we will feel their deflationary impact, whether it be incars or solar panels. The latestinflation predictionsfrom the Bureau for Economic Research suggest inflation will remain below 4% for the next three years. But he surely also deserves this nomination because of his political nous. On the face of it, our political situation would not look promising for a person who wanted to bring down the inflation target.
[/paywall]
