Deputy Governor Daniel Mminele: Ethical Foundation for Leadership Excellence breakfast meeting

Address by Mr Daniel Mminele, Deputy Governor of the South African Reserve Bank, at a Breakfast Meeting hosted by Ethical Foundation for Leadership Excellence, Polokwane, Limpopo

“Recent economic and monetary policy developments in South Africa”

1. Introduction

Good morning, ladies and gentlemen.

Thank you to the Ethical Foundation for Leadership Excellence for creating an opportunity for us to interact over this business breakfast today. Allow me to start by commending the Foundation on the important initiatives it has been undertaking since its official launch last year, to contribute to improved governance standards through ethical leadership excellence.

I have been asked to give you an update on recent economic and monetary policy developments. Many studies have highlighted the economic and social costs of bad leadership in various spheres of society, and thus one should not under-estimate the important role that ethical leadership can play in addressing the economic challenges that the world, including South Africa, currently faces.

We strongly believe that the credibility and reputation of the South African Reserve Bank (SARB), which is very critical to our work, depends on excellent leadership. Thus the Bank pays particular attention to its own leadership. Having engaged for two years in a bank-wide authentic leadership training programme, to access and use reflective and coaching skills, the Bank is now embarking on leadership development customised for each management level.

We concluded the most recent of our Monetary Policy Committee (MPC) meetings less than a week ago, and my remarks today will be largely informed by our assessment from that meeting. After some points on the global backdrop, I will talk about recent economic and financial market developments in South Africa, and provide an update on monetary policy in this challenging economic environment. Before I conclude I will briefly touch on economic developments in the Limpopo province, relative to national trends.

2. Global Economic Developments

A week ago the International Monetary Fund (IMF) released the World Economic Outlook (WEO) update, which confirmed that the global economy continues to struggle to find momentum. The IMF noted lackluster growth in most advanced economies, low potential growth and a gradual closing of output gaps, while prospects remained diverse across emerging market and developing economies.

Similarly, the G20 Finance Ministers and Central Bank Governors indicated over the weekend that the global economic recovery continues, but is facing challenges and downside risks, amid fluctuating commodity prices, high financial market volatility, geo-political conflicts, terrorism and refugee flows.

While some of these factors have been with us for a number of years now, more recently, the downside risks facing the global economy have been compounded by the outcome of the British referendum vote, or Brexit, as it is more commonly referred to. As a result of Brexit, the global outlook for 2016-17 has worsened, as the vote added significant uncertainty to an already fragile global economic environment, and is likely to affect confidence and weigh negatively on consumption and investment.

I should add that Brexit has also highlighted the importance of inclusive growth, an issue which was highlighted in the latest G20 communique.

The IMF noted that prior to Brexit, economic data and financial market developments pointed to an improvement in the outlook for a few large emerging markets and a modest upward revision to global growth for 2017 (0.1 percentage point). In the aftermath of Brexit, however, the IMF downgraded global growth projections by 0,1 percentage points for both 2016 and 2017 to 3,1 and 3,4 per cent respectively. Read more [PDF]
 

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