Kganyago’s warning on populist leaders

The age of populism is here, South African Reserve Bank (Sarb) Governor Lesetja Kganyago declared on Thursday night, warning about the rise of populist leaders and the threat they present to institutions such as central banks.

“Whether we are talking about rich countries or poorer ones, there is no denying that we are in an age of populism. We need to reflect on why populist ideas have this appeal and how we can respond,” he said in a keynote address at an Arbitration Foundation of Southern Africa (AFSA) event in Sandton.

While Kganyago did not specifically mention US President Donald Trump, who has returned to the White House and rocked several US and international institutions with attacks, executive orders and threats, it was a clear reference to Trump and other populist world leaders.

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Since his inauguration in January, Trump has withdrawn the US from the World Health Organisation (WHO) and other United Nations agencies, imposed sanctions against the International Criminal Court (ICC), and risked a trade war by threatening trade tariffs on key trading partners. In the US, Trump has also been increasing pressure on the US Federal Reserve.

“Populism was once seen as a developing-country phenomenon − something rooted in places like Argentina − and not much of an issue in mature democracies. But no one believes that now,” he said.

Kganyago noted that populism has risen in Western nations “especially since 2016”, “with the surprise outcomes of the Brexit referendum [in the UK] and the United States election”.

Trump’s first term as president started in January 2017, after he won the US elections in a tight and controversy-ridden race against Hillary Clinton the year before. However, he beat Democratic nominee Kamala Harris in a landslide victory in the 2024 presidential race.

Kganyago said that “the year of elections” (2024) highlighted rising populism globally even clearer.

He reiterated comments he made a few years back around populist leaders’ decisions often leading to economic disasters.

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Attacks on independent institutions

“But my focus today is on institutions. Populists have long been defined, in part, by their hostility towards institutions. The standard attack is that existing institutions are controlled by elites, who treat ordinary people with contempt and ignore their interests …,” said Kganyago.

“Populist leaders also typically promise to wage war on institutions, to clean out what they claim as the corrupt intermediaries so that they can take charge themselves. Unfortunately, when populists come into power, they usually fare badly. It is hard to run a modern country without a lot of help and technical expertise. It is hard to stay honest without the necessary checks and balances.

“This is precisely why institutions are established in the first place. Dismantling them typically results in chaos, incompetence and corruption. These adverse outcomes make it easy to condemn populism,” he added.

“But just because populism has a record of failure does not mean that established institutions are doing well,” Kganyago acknowledged.

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“The duty we have as leaders of institutions is not only to push back against populist attacks but also to ensure our institutions are above these criticisms. This is not an easy task,” he said.

Kganyago highlighted how the Sarb defended its independence when it came under attack several years back from the then Public Protector (Busisiwe Mkhwebane during the Jacob Zuma administration).

“Probably one of the most difficult [populist attacks] for us was in 2017, when the Sarb came under attack from the Public Protector – an independent institution established by the SA Constitution to uphold constitutional democracy and to investigate claims of abuse of power,” he noted.

“The Public Protector had investigated a case for which we believed she did not have jurisdiction. Despite this, we still assisted and cooperated fully with the investigation,” he explained.

“We were shocked when we found that one of her recommendations was that the mandate of the Sarb be changed. In essence, a key recommendation would have taken away the Sarb’s mandate of price stability without assigning it to another entity.”

“We felt duty-bound to defend the independence of the Sarb as a key institution of our democracy and challenged the report in court. The court ruled emphatically in our favour,” said Kganyago.

This article was republished from Moneyweb. Read the original here.