Tuesday, May 3, 2016


This article first appeared in the Business Times section of The Sunday Times on 20 March 2016 

LESETJA Kganyago’s announcement that the Reserve Bank’s monetary policy committee had decided to increase the repo rate by a further 25 basis points appears to have been overshadowed, perhaps rightfully so, by Deputy Minister of Finance Mcebisi Jonas’s bombshell that he resisted attempts to be “Guptarised”.

The deputy minister’s statement carried extensive economic context, including that “the current economic climate presents many risks for [the] country, which requires responsible leadership to avoid a full-blown crisis”.

He called on South Africans to “unite on the key issues relating to managing the macroeconomic risks” and said that “the extent to which we are able to navigate the current macroeconomic challenges, restore investor confidence and rapidly stimulate growth will depend on heightened levels of political leadership”.

In the context of the big reveal, it appears that the deputy minister was suggesting that the threat of state capture poses a macroeconomic risk to our country.

This risk becomes pervasive when no answers are provided to the constant rumours, innuendo and now firm allegations around one family’s personal relationship with the president.

It’s worth noting that the deputy minister’s press statement was issued by the National Treasury and not in his personal capacity.

Back in Pretoria, the Reserve Bank’s monetary policy committee was engrossed in its scheduled three-day meeting, and one would expect its six members to have had little time to pay attention to the latest instalment of Guptagate.

Before them was the unenviable task of deciding on monetary policy in a difficult economic context.

Inflation is still overheating, with the Reserve Bank expecting it to peak at 7.3% in the fourth quarter and end the year on an average 6.6%.

This is well above the 3% - 6% mandate range. However, the committee’s decision was not straightforward this time around.

The rand has staged a mini-comeback since the committee’s last meeting with a 4.5% recovery against the dollar.

The electricity tariff increase awarded to Eskom came in at 9.4% for 2016-17 as opposed to the 16.6% initially requested.

Even on the inflation front, things improved slightly, especially in relation to its long-term forecast.

At the committee’s last meeting, inflation was expected to peak at 7.8% by the fourth quarter. That number is now 7.3%.

Yes, it is still well outside the target range, but this slight improvement has led to a “within range” forecast of 5.5% in the fourth quarter of next year, giving us some much-needed light at the end of the tunnel.

All of the factors above led to three committee members favouring the 25 basis point increase we eventually got, with the other three members preferring no change.

“Ultimately the committee decided on an increase,” it said in a statement.

I am told Kganyago would have been called on to make a casting vote on the matter, given the deadlock.

So, in one week, two very big and very tough decisions were made by two leaders in the economic cluster of South Africa.

One is second-in-command at the Treasury. The other is the governor of the independent Reserve Bank.

The last time South Africans saw the two together was at the budget speech 2016-17 press briefing.

They were seated next to each other alongside Minister of Finance Pravin Gordhan and an empty seat, presumably meant for SARS commissioner Tom Moyane. The irony in all this would make for a riveting bestseller.

In any case, Guptagate will continue for months. More victims of attempted Guptarisation are likely to emerge, and perhaps those who were successfully Guptarised will come out, too.

As for you and me, the reality is that we are now paying a prime rate of 10.5% for our mortgages.

Inflation continues to undermine the purchasing power of our hard-earned income.

Perhaps we, too, could do with a ministerial post

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