South African Reserve Bank Governor Lesetja Kganyago.
Gallo Images/Business Day/Freddy Mavunda
Additional interest-rate cuts won’t resolve the real problems holding back the country’s economy, South Africa’s central bank governor said.
“No amount of quantitative easing or the reduction of interest rates would produce the kind of skills this economy needs,” Governor Lesetja Kganyago said in an interview with Business Day TV. “You do that through appropriate education policies.”
Some politicians and labour unions have urged the central bank to do more to support an economy that the bank expects to contract by 8.2% this year, even after it slashed its key rate by 300 basis points.
A lockdown that’s been in place to varying extents for six months pushed the economy into its longest recession in 28 years with an annualised drop in gross domestic product of 51% in the second quarter (which equates to a non-annualised fall of 16.4%). Many businesses closed down permanently or reduced staff and the unemployment rate has probably risen to a record 35%, according to the median estimate of economists surveyed by Bloomberg.
Adding to South Africa’s education woes is a national power utility Eskom that can’t keep the lights on.
As the gloom of the most severe stages of the shutdown eased the rolling blackouts that have periodically plagued the country since 2008 returned with a vengeance. Outages this year are the worst on record.
“We had just reopened the economy, yet we had electricity load shedding,” Kganyago said. “You can’t solve that problem using monetary policy. That tells you, you have got a structural problem.”