Outgoing SA Reserve Bank governor Tito Mboweni believes the institution should remain independent and free of political interference.

"If the central bank becomes politicised... the interest rate would be driven by election considerations, not long-term stability, which is why an independent central bank is important," Mboweni told students at the University of Johannesburg's Soweto campus on Thursday.

He was not convinced by views that the bank should be nationalised.

"I am not convinced that every company in public hands is more efficient than a private institution."

Mboweni mentioned South African Airways and Telkom as examples of companies in public hands whose performance did not convince him.

"Whoever believes that these companies are doing better because they are in public hands... can join me in my retirement. We can open an airline or a telecommunications company which would do better than SAA and Telkom," he quipped, leaving his guests in stitches.

People who did not have elections in mind

The bank's governor had to be able to stand their ground and take tough decisions, Mboweni said. He said the bank should have people who did not have elections in mind, nor were interested in politics and trade unions.

"As a governor you should be able to stand your ground and be prepared to lose friends... not be swayed by people marching to the bank. If that's going to be the situation, I might as well go back to Lesotho (the country of his birth) because I can't stand that."

He said the central banker was only popular when interests rates were down — as soon as rates were up he became unpopular.

Mboweni explained to a packed conference hall that the primary function of the reserve bank was to protect the value of the currency in the interest of economic growth and development, and to ensure the buying power of the currency was maintained.

"In order to maintain the buying power... inflation should be kept at a low rate because when it's down it makes the lives of ordinary people easier.

The rich can hedge against high inflation

"Rich people can always hedge against high inflation easily, buy Mercedes Benz and aeroplanes, but ordinary people won't be able to feed their families."

Mboweni said whoever believed a "little bit of inflation is good must be living in a cloud cuckoo land".

However, the governor said the inflation targeting policy was "terribly misunderstood" because the government had decided on it, not the central bank.

"All the bank did was to implement it... so people should have complained to the Union Buildings, not the bank."

He said after his retirement in November, he wanted to empower people and ensure they understood what the institution was about.

Mboweni said he owned 10 000 shares in the South African Reserve Bank and anybody could own that many shares in the bank.

"But the dividend is not that good because I only get about a R1000 a year."

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