The late Tito Mboweni was steadfast in his defence of the Reserve Bank during his time as finance minister, defending it against repeated political attacks, as well as maintaining a commitment to fiscal discipline that made it easier for it to deal with inflation without choking the economy, Reserve Bank governor Lesetja Kganyago said on Monday.
Mboweni, who served as the Reserve Bank’s first black governor from 1999 to 2009, as finance minister in 2018 to 2022 and labour minister in the Mandela government, as well as on several corporate boards, died on Saturday night after a short illness. Central bankers and economists have lauded the crucial role he played in developing and implementing SA’s economic policy in the early days of democracy as well as later during his time as finance minister.
Mboweni took over as finance minister after a stretch when the Bank’s independence and mandate had come under pressure from the EFF, public protector and ANC itself, which in 2017 resolved to nationalise the Bank. He also steered SA’s public finances through the unprecedented economic shock of the Covid pandemic.
But he always regarded his governorship of the Bank as the more senior role.
Kganyago said Mboweni’s major contribution to SA’s monetary policy was to make the Bank transparent and ensure it was held accountable by introducing press conferences after every interest rate decision and holding regular monetary policy forums around SA.
Mboweni oversaw a complete overhaul of SA’s monetary policy with the introduction of inflation targeting from 2000, which served to reduce SA’s average inflation rate from almost 10% in the 1990s to 6.5% in the first decade of targeting, during which real interest rates almost halved and the economic growth rate lifted.
More than two decades on, inflation and interest rates have stayed at consistently lower levels than in the pre-targeting period, with inflation peaking at under 8% even during the recent global inflationary episode in 2021 and now back at 4.4%.
But one of Mboweni’s big disappointments was that his move to have the Bank report to parliament on the state of the economy twice a year, after the release of its quarterly bulletins, had to be abandoned for lack of interest by parliamentarians, Kganyago said.
SA’s inflation targeting policy marked a radical change from the previous approach in which interest rates were set using a variety of metrics and decided by the Bank’s governor behind closed doors.
The “two Ms”, Mboweni and then finance minister Trevor Manuel, introduced the new policy in the late 1990s. Kganyago said Mboweni believed it was important that there was complete buy-in to the inflation targeting framework by the government and other important stakeholders, to embed the framework and make it successful. Mboweni brought to this his experience in the cabinet and his ability to engage with politicians.
Accountability
“But the two important elements that Tito brought in, apart from the big policy issue of inflation targeting itself, was, first, that he introduced the concept of full fledged press conferences with questions and answers from the journalists. That was a very important accountability mechanism,” Kganyago said.
“Second was that he wanted to demystify the Bank and demystify monetary policy. He came up with the concept of monetary policy forums that he proposed take place in every province. It was a really important development. He would do these forums himself and hear what people outside the analyst community thought about monetary policy and about the Bank,” he said.
The Bureau for Economic Research (BER) also paid tribute to Mboweni, highlighting his 2019 plan to turn around the economy as one of the most consequential policy decisions in SA’s economic policy trajectory, along with his decision to freeze public sector wages in 2020 and his introduction during Covid of the R350 a month social grant.
“The wage freeze ultimately started the slow return to the fiscal rectitude that had been the hallmark of the pre-Zuma era,” the BER said.
Tito’s plan, as it was unofficially known, formed the basis for President Cyril Ramaphosa’s Covid-era economic recovery plan and for the Operation Vulindlela reforms, including opening up the grid to private power generation.
The Thabo Mbeki Foundation said Mboweni played a critical role in preparing the ANC’s policy positions and programmes that transitioned SA from a divided, racist past to a future of possibility.
He was the architect of SA’s post-apartheid labour legislation and as governor championed the Bank’s constitutionally mandated role of inflation targeting and price stability, “crucial for a fragile post-apartheid economy”, the foundation said.
“His legacy in maintaining fiscal discipline endures to this day.”
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