answer to our growth problems, we will fail to discuss the difficult but vital reforms that might actually rescue us from our growth malaise. 1 lindeque, m. 10 june 2019. eyewitness news ( ewn ). retrieved from ewn : https : / / ewn. co. za / 2019 / 06 / 05 / what - is - this - obsession - with - the - reserve - bank - mboweni - sets - recordstraight - again. page 2 of 14 failing to get that conversation about growth going has further repercussions, because it feeds the notion that the sarb ’ s private shareholding matters to the policy framework we have and the decisions made on policy. and again, this shareholding debate is more damaging to our economy than it should be. it sends a signal to investors, both here and abroad, that our macroeconomic framework is at risk, making the cost of debt higher than otherwise and undermining confidence. who loses from all this? one of the biggest hits is to indebted households and the beneficiaries of public spending, who pay the price for skyrocketing interest costs on our public debt as the resources to spend are squeezed. these very serious problems aside, the fact that south africans want to engage with the sarb and its mandate is welcome, and we applaud it. of course, not everyone agrees with us 100 % of the time. a certain amount of disagreement is normal, in central banking, as in so many other things. indeed, not only is public engagement and discussion of monetary policy appropriate. when it is based on evidence, it is something we encourage. in the old days, central bankers did everything in secret, and any public statements were deliberately complicated. nowadays, we try to be open and transparent. we have learned that monetary policy works better with communication. an economy is populated with people. if these people understand what the central bank is trying to do, they adjust their behaviour, which in turn helps the central bank to achieve its policy goals. furthermore, we appreciate that having independence creates a duty to be transparent and accountable ; we are not, and do not want to be, exempt from democratic principles. 2 2 kganyago, l. 2019. ‘ principled agents : reflections on central bank independence. ’ 19th annual stavros niarchos foundation lecture. washington d. c. : peterson institute for international page 3 of 14 this talk is

mainly because of positive supply shocks. in particular, food price inflation declined to unusually low levels, around 3 %, compared with a long - term average nearer 7 %. the exchange rate also stabilised : after depreciating every year from 2011 to 2016, it began trending sideways, which helped to moderate inflation for imported goods. we also like to think our communication made a difference. people were seeing inflation around page 7 of 14 4. 5 %, and they were hearing the sarb say that ’ s where we planned to keep it, so they used that information in setting prices and wages. all of this happened without us having to adopt a tight policy stance – we started with the repo rate at 7 %, and we never had to go above that. put simply, we got a good opportunity to get inflation lower, and we used it. did we do the right thing? again, i appreciate that informed people disagree, and these are good - faith disagreements. people who understand economics and genuinely want what is best for south africa, take different views. but let me make two points about our decision. first, what we are doing is completely consistent with our target and our mandate. some people tell a story that in february 2010 there was a letter from the minister of finance changing the sarb ’ s target and how the sarb is now ignoring that letter. 5 it is strange for me to be told what that letter was about, because at the time i was director - general in the treasury, under minister pravin gordhan, so i should know the content of that letter. it did not establish a new target close to 6 %. rather, it reaffirmed the 3 - 6 % target range, and it reaffirmed the sarb ’ s practice of pursuing this target in a flexible way. flexibility means the sarb should avoid excessive volatility in growth and interest rates. in other words : if an inflation shock moves inflation outside of the target range temporarily, the sarb doesn ’ t have to hike interest rates to return inflation to target immediately. the sarb just needs to do enough to get inflation to return to target over time. the minister ’ s letter specifically recognised that inflation expectations need to be anchored, 5 gordhan, p. 16 february 2010. national treasury. retrieved from national treasury : http : / / www. treasury. gov. za / comm _ media / press / 2010 / 201002170