South African Reserve Bank (SARB) Governor Lesetja Kganyago has warned leaders that a wave of populism sweeping a number of global economies was a sign that leaders should be more responsible and accountable. 

Speaking at the Association of Black Securities and Investment Professionals conference in Johannesburg on Friday morning, the central bank head mentioned a number of countries that he said continue to pay the price for populist economic policies, including Zimbabwe, Peru and Venezuela.

“If you don’t think inflation matters, go try some. Or ask all the Zimbabweans or Venezuelans who had to leave their countries when their economies collapsed. Unorthodox policies have totally orthodox consequences, as those people can confirm,” Kganyago said, according to his prepared remarks. 

He warned that while not always mutually exclusive, doing the right thing and doing the popular thing were often at odds with each other. Making populist decisions, he said, often simply delayed financial pains instead of addressing them.

Kganyago was speaking in the context of a tough economic year for South Africa, which slipped into a technical recession after two successive quarters of negative growth. South Africans have also had to deal with a one percentage point VAT increase, a wave of fuel price increases, and stubbornly high unemployment figures.

The SARB governor said that while populists were good at tapping into social frustrations, they were not very good at economics. As a result, their their ideas routinely ended in disaster.

However, he said, this did not mean they were altogether foolish, but it rather served as a reminder to be better informed and more responsible.

“We cannot just say the populist path will end in disaster. It will. But we still have to point out another path. You cannot just be against populism – you need to be for something too. We need to talk about how we are going to get back to real and sustainable growth in South Africa,” he said.

Those who wanted to “engineer a short-term boom” and ignore long-term economic costs “won’t like it when the long-term shows up”, after about two years from the implementation of their quick-fix policies, he said.

In a reference to the economic and political quandary in Venezuela, Kganyago said populism was an effective tool which politicians used to win supporters because it spoke to ordinary people about real problems.

“When Hugo Chávez attacked corruption and inequality in Venezuela, he wasn’t just making trouble. He was confronting some longstanding problems of Venezuelan society.  But populism also has a bad side. It pretends there are easy solutions, even where there are none – where the problems are in fact very difficult,” he said. 

In another example, Kganyago said when people see governments printing money, they start to put a lot of time and effort into figuring out where inflation is going, and raising their prices to keep ahead of it.

“This process then gets worse over time. In the first year, you get a fair amount of growth and a bit more inflation. In the second year, you get even more inflation and less growth. A few years in, inflation is running at very high levels – there are cases of inflation exceeding several thousand per cent a year, including Peru and Brazil, and as Zimbabwe showed us, there are many more zeroes that can be added after that,” he said.

He said South Africa’s social challenges meant leaders needed to be extra careful about managing the system responsibly so that it does not blow up.

Click here to read the full speech.