A debate over ownership of the South African central bank is increasing investor uncertainty and fuelling the risk premium attached to the country’s debt, Governor Lesetja Kganyago, said on Wednesday.

Bank

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Kganyago said in a speech at a university in Pretoria that the debate could damage the economy and send wrong signals to investors at home and abroad.

“This shareholding debate is more damaging to our economy than it should be. It sends the signal to both investors here and abroad that our macroeconomic framework is at risk, making the cost of debt higher than it would otherwise be,” Kganyago said.

Earlier this year, a faction in the governing African National Congress party pushed to broaden the South African Reserve Bank’s mandate to include boosting economic growth and job creation alongside price stability.

The party also called for the bank to be nationalised.

That followed a decline in first-quarter economic growth of 3.2 per cent, the worst in a decade as power outages by state utility Eskom hit mining, manufacturing and retailers.

President Cyril Ramaphosa and Finance Minister Tito Mboweni defended the bank’s independence and its inflation-targeting mandate, and this month, Kganyago was appointed for another five-year term as its governor.

In its February budget, the National Treasury forecast net loan debt as a ratio of gross domestic product would rise from 49.9 per cent to 55.5 per cent by 2022.

Analysts expect a figure closer to 60 per cent because of bailouts to state companies, a level seen as a red line by ratings agencies.

Vanguard