The public spat between the Reserve Bank governor and the finance minister threatens policy credibility both sides profess to prize. Lesetja Kganyago declared a preference for a 3% inflation anchor only for Enoch Godongwana to insist that targets are the Treasury’s remit.
The rare discord between two usually aligned institutions raises thorny questions about institutional credibility, policy cohesion and the political economy trade-offs of taming prices. Crucially, it is a test of how two powerful institutions share the rule book on price stability.
It’s not the first time Kganyago has pushed to lock in a lower anchor. Back in 2017, the Bank’s monetary policy committee quietly began “preferring” the 4.5% midpoint for its forecasts.
Then finance minister Pravin Gordhan saw no reason to object.
Markets barely blinked. There was no public row because the adjustment was low stakes, consensual and set against a backdrop of benign global rates and a cooling inflation trend.
Fast-forward to 2025. An explicit pull towards the 3% floor reads like a genuine tightening of policy. Markets already price in sub-6% repo rates and a firmer rand. By ditching the midpoint nudge for an anchor at the bottom, Kganyago has signalled a de facto rule change without a joint communique — directly challenging the Treasury’s claim to the final word on targets.
Personalities amplify the drama. Godongwana feels blindsided by a move he insists only he, through the medium-term budget policy statement, can authorise. This breach of protocol has cast a technocratic spat into a political slugfest, exposing an institutional fault line over who truly holds the leash on inflation.
Markets shrugged. Bond yields, the rand and the stock market steadied. Analysts at Bank of America believe a lower anchor is largely priced in, regardless of formal mandates. Yet this calm belies a deeper risk. A single tweet or off-the-cuff remark in Washington could unnerve investors, questioning which boss truly holds the leash.
Global headwinds complicate the script. Fed tightening and Middle East tensions keep commodity swings high. Against this backdrop, a clear domestic anchor is more valuable than ever, but only if it carries the weight of co-ordinated policy.
And political lobbies smell an opportunity. For years, labour unions and some politicians have criticised inflation targeting as obsessing over prices at the expense of jobs. Now, the shift to an even lower target is pouring fuel on that fire. The EFF and MK are practically guaranteed to seize on this tug of war and paint the central bank as a rogue institution, exactly the ammunition they need to neutralise the tool of “white monopoly capital”.
Others are likely to brand the Treasury as obstructionist, refusing to make the short-term painful trade-off between a more visible pain of high interest rates on households choking under a mountain of debt and the less visible but far-reaching benefits of a lower inflation target.
Each faction will claim the moral high ground, widening the rift.
Kganyago argues that not seizing the opportunity of lower current inflation would itself carry a cost, a fair point, since letting inflation rise back towards 5% might entrench a higher plateau and fuel complacency. Entrenching a lower inflation norm now will pay dividends later in cheaper capital and a stronger rand. Godongwana, for his part, is not rejecting the goal of lower inflation. He is rejecting a “go it alone” approach that could leave the government holding the bag if things go awry.
Both perspectives have merit. What is lacking is a unified strategy to manage the transition smoothly. Without it, inflation could mutate into a broader loss of policy credibility, if citizens conclude that technocrats and politicians alike are fumbling their economic stewardship. The path forward requires mending fences and moving forward from discord to dialogue.
This public tiff may have a silver lining. When it serves to provoke institutional soul-searching and forge clearer concepts, it could serve the economy. But left unresolved, it can turn confidence into collateral damage. The next act must be alignment, not another round of headlines. Otherwise, the policy coherence both the Bank and Treasury profess to champion will unravel under lingering discord.
• Motsoeneng is Business Day acting editor
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