Xolile Guma, Senior Deputy Governor, SA Reserve Bank

Xolile Guma has been appointed senior deputy governor of the Reserve Bank

... The meltdown in Greece contains two lessons for South Africa, he says.

"One is that fiscal policy does matter. If you don't rein yourselves in you can expect a crisis to occur at some point in the future.

"Secondly, it says something about the benefits of a flexible exchange rate. Those who chose to go into a fixed exchange rate within the euro area effectively gave up one policy instrument.


"And if you don't have that option then obviously the process of adjustment to imbalances in the macro economy must fall disproportionately elsewhere."

That's something those punting monetary union in Africa might consider most carefully, he suggests.

As big as the temptation "will always be" on governments including our own to spend what they don't have, Guma does not believe something similar would have been allowed to happen in South Africa.

"The pressure will always be there, but I think we have authorities in national Treasury and elsewhere in the system who are fully cognisant of the dangers that would follow were they to give in to that kind of pressure."

Guma says minister of finance Pravin Gordhan's celebrated note to Governor Gill Marcus earlier this year about growth and development being part of the central bank's mandate changed nothing.

"That has always been something that the Reserve Bank considers, but the overriding concern must be the constitutional imperative (to keep inflation in check) and that hasn't changed."

What about above-inflation wage increases, most recently at Transnet?

"If wage increases continually outstrip increases in productivity then there will be a problem going forward," he warns gently.

Does he share the general optimism about the long-term benefits of the World Cup for South Africa?

Beyond agreeing that it has inspired "social cohesion", he is reluctant to commit himself. "The sums haven't been done yet in terms of a financial cost benefit analysis."

Guma, 53, who has a doctorate in economics from Manchester University, joined the Reserve Bank in 1995 as an economist in the research department. ... more

Source: Sunday Times