Executive Management Department
An address by Lesetja Kganyago, Governor of the South
African Reserve Bank, at the launch of the MPC Schools
Challenge, Pretoria
21 July 2017
Good morning ladies and gentlemen
Decisions whether to cut, increase, or keep interest rates unchanged are of enormous
importance to the economy general, and they affect most people, either directly or
indirectly. This often raises the question: how do central banks make these decisions,
and specifically, what factors do they take into account in making these decisions.
One of the channels that many central banks use to explain how they make these
decisions and what factors they take into account is to run a competition for high
school learners. Typically, these competitions involve a group of learners forming
themselves into a Monetary Policy Committee and making a case either to cut,
increase, or keep interest rates unchanged.
The South African Reserve Bank began a pilot in 2012 in partnership with the Gauteng
Department of Education to:

Offer learners the opportunity to enhance their understanding of monetary
policy and how it relates to the economy as a whole;
 Help learners understand better how the economy works;
 Assist learners to better understand how the SARB's Monetary Policy
Committee makes decisions;
 Improve broad economic literacy in the country;

Create an opportunity for learners to put the classroom economic theory into
practice and thereby enhancing their understanding of economics;

Stimulate interest among learners in a career as an economist; and

Raise awareness and understanding of the role and responsibilities of the
SARB.
The MPC Schools Challenge has since been expanded to cover 7 provinces. We have
also since partnered with the Department of Basic Education and the provincial
departments. We have had 450 schools participate in the challenge since 2012,
involving 1 340 learners. By participation we mean schools whose team submitted an
essay.
A requirement of the programme is that participants take a combination of economics
and mathematics subjects, excluding maths literacy. Certain schools therefore do not
qualify as they do not provide this learning combination.
Next year, the challenge will become national with the addition of KwaZulu-Natal and
the Western Cape provinces. Hence, today's launch of the MPC Schools Challenge.
The way the competition works is that each school must constitute a team of four
learners who model themselves on the Monetary Policy Committee (MPC). The team
presents its case to a panel of SA Reserve Bank economists. Representatives of the
Department of Basic Education moderate the outcome. To ensure that all entrants
have access to the same basic data, the SARB provides learners with relevant
economic data.
Accessing data is perhaps the easy part. The first hurdle is deciding how the outlook
for domestic and global economy impacts on future inflation. To clear this hurdle
requires the team to interpret current economic conditions and events, and to apply
judgement about the likely future path of the economy. There are many factors that
the team must consider, and they are often moving in different directions, making
judgment on how they will affect future inflation that much more difficult. At the end
of it all, committees rely on judgement in making the call whether to cut, increase, or
keep interest rates unchanged.
Monetary policy decisions in the SARB are made by the Monetary Policy Committee
(MPC). The MPC currently comprises six members, being the Governor, the three
Deputy Governors, and two other senior officials of the SARB.
Every decision of the MPC is an outcome of in-depth discussion and debate. Even a
'no change' decision is a policy decision. I should also note that the monetary policy
decision is not a one-off event; it is a continuous process which culminates in the MPC
meeting where decisions are finally taken. We are constantly talking to each other,
discussing what we see and how we interpret what we see.
There is a sizeable literature on the relative efficiency of committee-based decision
making. A committee tends to pool information and ideas from a group comprising
different skills and views, and it also provides insurance against extreme preferences
and outcomes.
So, there is an additional benefit that participation in the MPC Schools Challenge
potentially offers learners. And that is that those learners get an opportunity to
develop or put their social skills into practice. By social skills I mean the ability to
interact with fellow human beings. Literature shows that the ability to interact with
fellow workers, successfully working as a team remains among the most important
skills in the modern economy. This is because technology has yet to successfully
simulate human interaction.
The ability to listen to the views of your colleagues, question or debate the issues they
raise and attempt to persuade them otherwise has a broad societal benefit, way
beyond application in policymaking. In that sense, the ability to engage with the ideas
of fellow workers and collaborate with them will, for a long time to come, remain one
of the prized skills by employers.
The MPC Schools Challenge is therefore a contribution by the SA Reserve Bank
towards improving the understanding by young South Africans of how the economy
works, why high inflation is bad for an economy and how the Monetary Policy
Committee makes decisions.
Thank you