Reserve Bank governor Lesetja Kganyago will deliver the IMF’s Michel Camdessus annual central banking lecture in Washington DC on Tuesday. The lecture will be followed by a one-on-one conversation with IMF MD Kristalina Georgieva.
The lecture is an annual event to highlight the IMF’s commitment to collaboration with member countries’ central banks and to provide a forum to discuss issues in central banking.
Kganyago published an article in the IMF’s Finance & Development magazine in which he said advanced economies would do well to look to the Global South for lessons as central bankers around the world grapple with high inflation and debt costs. He said emerging-market central bankers have ample experience dealing with these conditions, including the political pressure that often follows policy tightening.
He said advanced economies had mistakenly assumed that fiscal and monetary policy do not overlap, adding that improved co-ordination between sustainable fiscal policy and monetary policy would create important synergies, reducing the impact of supply shocks, keeping the cost of financing governments low, and taking inflation off the list of concerns of households and firms throughout the emerging world.
“I have spent more time trying to gauge the impact of supply shocks, and communicating how we distinguish between transitory and persistent effects, than I have managing demand-side pressures,” Kganyago said. “Many emerging markets have had similar experiences. Now, as the economic conversation in advanced economies changes to address higher inflation, emerging markets have something to offer.”
Also on Tuesday, manufacturing production data for May will be released. Output surprised in April and chalked up its first gain in six months. Manufacturing activity increased 3.4% year on year in April, coming in better than market forecasts of 2.5% and pointing to a good start in quarter two GDP growth.
Africa economist at Oxford Economics Jee-A van der Linde said the improvement in activity suggests manufacturers are becoming progressively more resilient to the effects of load-shedding as companies reduce their energy dependence on Eskom.
Manufacturing is a R513bn sector in real gross value-added terms and made up 11.2% of the economy in the first quarter of 2023, down from 15% in 1995. It is the fourth-biggest sector, employing nearly 1.2-million people, according to the first quarter of 2023 quarterly employment statistics — a survey of formal business establishments.
Manufacturing production also increased on a monthly basis, rising 0.5% in April, from a downwardly revised 3.4% jump in March and beating market forecasts of a 0.5% decline.
Investec economist Lara Hodes said manufacturing production is forecast to have lifted by about 2.3% year on year in May on base effects, as conditions in the manufacturing sector remain subdued.
Mining numbers for May will be out on Thursday. Mining production in SA rose 2.3% year on year in April after a downwardly revised 2.2% slump in March. Market forecasts were for a 0.9% increase.
This marked the first month of growth in mining activity after 14 consecutive months of declines, with the largest positive contribution coming from gold, largely due to base effects. In April 2022, Sibanye-Stillwater’s gold operations in SA were shut down by a strike.
On a monthly basis, mining production rose 1.8% in April, after an upwardly revised 6.9% jump in March.
FNB chief economist Mamello Matikinca-Ngwenya said the monthly expansion in mining output defied anticipations of the negative impact of higher stages of load-shedding and, if sustained, could imply increasingly less reliance on the Eskom electricity grid. “Nevertheless, logistics challenges and slowing external demand remain a near-term constraint on mining output,” she said.
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