The importance of the South African Reserve Bank’s (SARB’s) independence was underlined repeatedly during a virtual celebration held on Wednesday to mark the institution’s centenary – the bank opened its doors to the public at its first premises in Church Street, Pretoria, on June 30, 1921.

In her address, International Monetary Fund MD Kristalina Georgieva described the SARB as a “role-model of independence, professionalism and integrity within South Africa, across the continent and beyond”.

She argued that the SARB’s continued independence should be viewed as one of its three main achievements, with the others being its dogged pursuit of its price-stability mandate and boosting financial resilience through effective regulation and supervision.

“Strong institutions were the foundation of sustainable and inclusive economic growth – something we are all striving for as we look beyond the pandemic,” Georgieva said.

Likewise, Finance Minister Tito Mboweni also stressed the importance of the bank’s independence in his address.

Mboweni noted that when he was appointed the eighth governor of the bank in 1999 by then President Thabo Mbeki there was an expectation that the move signalled that “an era of cheap money had arrived”.

“I made it clear on the day I was inaugurated as governor that such thoughts would be severely disappointed.

“And that central bankers are not populists, and that if you meet a populist central banker anywhere that is normally the beginning of trouble in that country,” Mboweni said, without making any direct reference to the current political pressures on government to rein in the bank and its policy of inflation targeting.

In the early 2000s, the SARB became the thirteenth central bank globally to adopt an inflation-target framework, which was set by the Finance Minister, in consultation with the governor, at between 3% and 6%.

Governor Lesetja Kganyago said that the independence of the bank emerged as an effective way of ensuring that monetary policy focused on the key objective of keeping prices stable.

“This is not possible with weak institutions. Institutions in a democracy matter and quality institutions matter even more – the SARB is one such quality institution,” he argued.

The flexibility of the inflation-targeting framework and its anchoring of public expectations about inflation, he added, had assisted the country weather the global financial crisis of 2008 and 2009 and had ensured that the country entered the Covid-19 crisis with stable and low inflation rates and moderate inflation expectations.

This had provided the SARB with policy space to provide support to households and firms, primarily through the reduction in the repurchase (repo) rate.

The repo rate was cut by a cumulative 275 basis points between March and July 2020 and, at 3.5% currently, was at an all-time low, while the prime rate, at 7%, was at a 54-year low.

The economic recovery, Kganyago said, was still on track, but “there will be pitfalls along the way, as illustrated by our shift back to a Level 4 lockdown”.

“There is no question that our recovery will progress and our sound policy frameworks will continue to allow flexible approaches while building confidence.”