South Africa’s economic woes reflect the state of the global economy.
This was the overarching sentiment shared by the Governor of the South African Reserve Bank (SARB), Lesetja Kganyago as he delivered his Special Distinguished Lecture on Wednesday, 10 May 2023. His topic was ‘Challenges facing the global economy: A South African perspective’.
The lecture, organised by the University’s College of Business and Economics (CBE) and the School of Public Management, Governance and Public Policy (SPMGPP) provided an opportunity for Kganyago to share his expertise as the leader of the Central Bank and as a renowned economist.
“As such, the topic chosen for my address today – challenges facing the global economy from a South African perspective – could not be more fitting. This topic is particularly important for South Africa which, alongside other emerging market economies, has had its own idiosyncratic challenges being exacerbated by these global shocks,” Kganyago said.
SPMGPP’s Professor Shikha Vyas-Doorgapersad, who played the role of MC for the lecture shared that a distinguished lecture is an opportunity for prominent individuals to share more of their expertise. Kganyago, she said, was selected for his vast knowledge and expertise in economics.
In his welcome remarks, Executive Dean of CBE, Professor Lungile Ntsalaze reflected on how after just surviving the COVID-19 Pandemic, the globe faces several crises. Professor Ntsalaze further shared his hope that Kganyago’s lecture will provide enlightenment on how South Africa (SA) is impacted by the global situation.
“Without breathing a sigh of relief after surviving the peak form of COVID-9, the Russia-Ukraine conflict started and its effect on energy and food prices is driving up global inflation. The energy crisis is a reality, the same as the food crisis – the cost-of-living crisis we are in may quickly turn into a broader humanitarian crisis that is likely to fuel social unrest because survival needs like food, unfortunately, cannot be postponed.
“Ntate Kganyago, it means a lot to us for you to come here and educate the nation about the challenges facing the global economy so that we can anticipate what is to come and respond accordingly,” Professor Ntsalaze said.
Kganyago used his lecture to outline the impact that the COVID-19 pandemic had on the economy, the status of the economy after the pandemic, the country’s inflation landscape and what way forward is.
Discussing the impact of loadshedding on the economy, Kganyago said the SARB had found evidence that the blackouts are impacting prices.
“In addition to the initial studies on the impact of load-shedding on growth, there is recognition and growing evidence that the country’s ongoing energy supply challenges are impacting on prices as well. The SARB now estimates that load-shedding will add 0.5 percentage points to headline inflation in 2023,” he said.
He said the impact of global pricing would ultimately be felt by SA, due to our economy being an open economy.
“Overall, South Africa is no different from most countries that have experienced a surge in price pressures. With our economy being an open economy, global price pressures were bound to, sooner or later, reach our shores. Higher global food and oil prices and, more generally, elevated global goods inflation, translated to inflationary pressures in the domestic economy ‒ partly transmitted via the weaker rand. This pushed domestic headline inflation to a high of 7.8% in July 2022 ‒ a rate that was last reached almost 14 years ago”.
He ended his lecture by reaffirming the SARB’s commitment to its mandate-ensuring price stability.
“As we have reiterated before, we are constantly monitoring price developments and stand ready to act as necessary to fulfil our mandate. As an independent central bank operating a flexible inflation-targeting framework, the SARB’s primary goal is to guide inflation and inflation expectations closer to the midpoint of the target band. I believe that many of us here understand that low and stable inflation is a prerequisite for a conducive business environment and, in turn, for inclusive and sustainable economic growth. We remain committed to ensuring price stability,” Kganyago said.
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