In a frank admission to MPs, Reserve Bank governor Lesetja Kganyago acknowledged tensions with the National Treasury over the inflation target — marking his first public recognition of strain between the two institutions.
Kganyago was addressing parliament on Thursday during the presentation of the annual reports of the Reserve Bank, Prudential Authority and the Corporation for Deposit Insurance (Codi), when he was pressed on the apparent rift about the Bank’s recent shift towards a “preferred” 3% inflation target — the lower point of its 3%-6% target range.
“The communication was not what it was supposed to be, to be honest, and we took active steps to correct that,” he said, adding there was “constant engagement” about “what has gone wrong” between the two institutions.
Kganyago said an unnamed individual had even offered to mediate between him and finance minister Enoch Godongwana, but the minister declined, insisting the two resolve the matter directly.
“And we found each other,” Kganyago said.
For the past few years the Reserve Bank has called for the target to be lowered — in line with other emerging markets — to make SA more competitive and ensure permanently lower inflation and interest rates.
At September’s monetary policy meeting, the Reserve Bank went it alone in effectively shifting SA’s inflation target to 3%, surprising market players who had expected the move to come only when Godongwana announced it — potentially during November’s medium-term budget policy statement.
At the time, Godongwana pushed back against the Bank’s statement that it “preferred” the 3% target, accusing it of “unilateral announcements that pre-empt legitimate policy deliberation”.
In September, the Reserve Bank and the Treasury issued a joint statement that ended the public standoff, saying SA’s new inflation target would be announced “as soon as is practical”.
Beyond the lesson in communication, Kganyago acknowledged another key takeaway from the episode: calls for quicker resolution of policy matters often underestimated the complexity of the process.
“The minister and I met, and we put our teams together and said that there are some loose ends here — go tie down these loose ends. That’s why you will find our statement does not say ‘by this date or this date’ [rather] ‘as soon as it’s practically possible’, and the poor chaps are working very hard to make sure that all those loose ends are tied,” Kganyago said.
“The important thing to note here, as you will see from this [statement], is that there isn’t a disagreement about the lowering of the target. It’s a question of timing, and as you had seen from the minister’s initial statement, he wants to consult more stakeholders.”
Kganyago said that even before the joint statement in September, his message had been consistent: “We will find each other.” That, he said, has now happened. “[We’ve] set a motion in progress, and I think the country is in a better space than it otherwise would have been.”
On Thursday, Kganyago reaffirmed his long-standing call for the lower target. He said an average inflation rate of 6% means prices in the economy double about every 12 years.
By contrast, if inflation were anchored at the midpoint of the current target range (4.5%), prices would take about 16 years to double. At the preferred 3% level, the doubling of prices would only occur after about 24 years.
“Make your pick: the conversation that you have is, do you want prices to double every 12 years? Or only double every 24 years? That’s the conversation that we got engaged in,” he said.
Update: October 9 2025
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