Tito gone fishing

Tito Mboweni was in the news this week because he was quitting to go fishing. Then, after chatting to ANC boss Gwede Mantashe, it seemed that Mboweni was prepared to keep his fishing part time. He would stay, if asked.

The Reserve Bank governor, who is appointed by the president, will become a curious political animal in coming months as his contract expires in August next year, several months after President Jacob Zuma is expected to take office in April.

But even this is no certainty with Mboweni noting that Zuma still has to win an election to get to office.

But never mind Zuma, how well has Mboweni done? There will be some observers who’ll say he has protected the independence of the Reserve Bank, his prime role, but it is not as though he has had to fend off barbarians at the ramparts.

The Thabo Mbeki government and its key officers such as Trevor Manuel have been enthusiastic supporters of this independence. And at the time of writing at least, the words “kill” and “governor” have not yet found their way into the same sentence of the speeches of Julius Malema and Zwelinzima Vavi.

Mboweni has been fortunate enough to lord over the markets at a time when the key institutions of our democracy have not been under attack by high-profile elements of the ruling party.

He also ascended to this office 10 years ago when interest rates were at stratospheric levels, 25,5%, making the current 15,5% seem like a great deal. So his rule has coincided with the great pax of continuous economic growth.

His main job, as everybody knows, is to keep inflation within a 3% to 6% range. At this he has failed miserably, the lastest inflation figures coming in above 13%. Since government has been nominally in favour of inflation targeting, you’d think that he’d have come in for a caning as price increases headed above 6%.

I have this image of Mboweni, in short pants, on the carpet in the president’s office with the chief reading him the riot act.

But if government was really serious about this, it could link his salary to the target range. So, for example, he could take a R200 000 pay cut for every percentage point inflation exceeds the target range.

At nine percentage points above the range, Mboweni would right now be taking home very little of the R2-million he earns.

But, if carpeted and challenged, he would no doubt shoot back that he is not to blame for much of inflation.
Firstly, administered prices, those controlled by government, were at mid-year increasing by 14,5% a year, well above the target range. These prices make up 20% of the total.

Secondly, government is ultimately responsible for setting the competitive temperature in the economy to ensure that competition rather than cartels, is responsible for what we pay at the check out.

In too many cases, as we have learned in recent months as sector after sector has been carpeted by the competition authorities, the watchword of business is collusion rather than competition.

Prices internationally are mostly being driven by high fuel prices which, in turn, are driving food prices.

Oil prices are dollar denominated, but we make a lot of our own fuel from coal using low-quality coal that has no or low value outside the rand environment. But we make it into fuel and then charge it to ourselves in dollars. One prediction I’ve read is that Sasol will accordingly announce profits of R25-billion this week.

So if you think about it, the job given to the governor is a bit of a fake. He is to keep inflation in certain limits, but has limited tools to achieve this, and government policy, either by omission or commission (think of the monopolies which it has privatised) meanwhile, does its best not to keep price increases within the range.

If he does not do the job as required, he receives no sanction and no salary cut. This probably leaves him with too much time on his hands, so he is given to worrying about the colour of his tie, the cut of his suit and which camera angle best suits his look.

But maybe he could have done more anyway. Perhaps he should have been on Statistics South Africa’s case earlier to produce its review of the basket of prices that make up the consumer price index. The review — two years late — may, as Investec noted, lead to an easing of the upward pressure on interest rates by two percentage points or so.

When Investec volunteered this assessment at mid-year, Mboweni, he with too much time on his hands, did not thank it for its contribution, but rather went on radio to chastise Investec and have its CEO called in for a meeting with the Registrar of Banks.

For so many reasons, then, it is hard to evaluate just how good a job Mboweni has done. But, if I was him, there’d be one thing that would sit very uncomfortably with me. The Financial Mail in July published a table from Nedbank’s guide to the economy of 24 developing and developed countries in terms of how aggressive their monetary policy stance has been.

It groups the countries into doves (13), neutral (5) and hawks (6). The most hawkish, in the gold medal spot, head and shoulders above the others, is Mboweni.

We have the most aggressively priced money in the world. Given our development needs and widespread poverty, this is not a list I’d like to top.

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Kevin Davie

Kevin Davie is M&G's business editor. A journalist for more than 30 years, he has worked in senior positions at most major titles in the country. Davie is a Nieman Fellow (1995-1996) and cyberspace innovator, having co-founded SA's first online-only news portal, Woza, and the first online stockbroking operation. He is a lecturer at Wits Journalism. In his spare time he can be found riding a bicycle, usually somewhere remote.

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