Calls are mounting for the SARB to do more as economy suffers the effects of Covid-19. Picture: MARTIN RHODES
Calls are mounting for the SARB to do more as economy suffers the effects of Covid-19. Picture: MARTIN RHODES

Pressure is mounting on the SA Reserve Bank (SARB) to do more to save the economy from the effects of Covid-19, with deputy finance minister David Masondo calling on the Bank to buy government bonds “directly”.

In March the Bank announced that it would be buying government bonds from the secondary market, not directly from the National Treasury. The central bank has also reduced the repo rate by 200 basis points, giving relief to indebted consumers.

But some are calling for more action.

“The immediate cause of the 1930s Great Depression was due to the failure of the central bank to act as the lender of last resort. Many countries got out of depression once the government became the spender of last resort,” Masondo told the Sunday Times.

“The question for us in SA today is whether the SARB should be the lender of last resort for the government as well, so that the government will be the spender of last resort, to enable economic recovery. It is the independent decision of the SARB to decide how much money they supply and for what specific purpose in the context of price stability for economic growth.

“The capacity of our government to raise revenue from tax and borrowing is highly limited. Covid-19 and the recent downgrades by the credit ratings agencies have worsened our economic woes. Given our fiscal constraints, I would support the SARB if they decide to directly buy government bonds.

Let the Reserve Bank open up and let us look at the PIC [Public Investment Corporation].
ANC national working committee member Nomvula Mokonyane

“Such bonds must be once-off special bonds with earned proceeds, and should be treated as a temporary measure with a clear exit plan.

“Furthermore, such money from the SARB must be used for immediate Covid-19 health-related interventions and for public infrastructure and industrial and agriculture financing as part of economic recovery measures,” the deputy minister said.

Even as the National Treasury scrambles to secure hundreds of billions of rand to fund the government's ambitious stimulus package, a political debate about the source of the funds is continuing in the ANC.

The SACP is pushing for action from the Bank beyond adjusting the interest rate. The party is also in favour of a local mobilisation of funds as opposed to looking to international monetary institutions.

ANC national working committee member Nomvula Mokonyane told the Sunday Times that the party still needs to deliberate on the government's decision to approach the International Monetary Fund (IMF) for financial assistance — even in the case where the funds are only for Covid-19-related expenditure.

“I don't believe that there are no conditions [to the IMF Covid relief]. There has never been that. It is not in the script of the IMF and World Bank in a globalised economy,” said Mokonyane.

“Now that our borders are closed, let us look at our own people. The call of printing of money does not mean print using paper and ink. Let the Reserve Bank open up and let us look at the PIC [Public Investment Corporation]. I mean the Steinhoff stories are an example of where there is money.

“And for me the act of patriotism has to do with where we go out to borrow money. Because of isidima [dignity] within you, you will never go to a neighbour you don't speak to, to ask for something, because they will put conditions on that.

“I am saying, the saying is correct, the application is a problem and I don't say we have actually deliberated on this, even as the ANC, because it is not about what they are telling us now but it is about national pride and sovereignty, but also making do with what you have.”

The ANC Women's League has also stated its “grave concern” over the decision to approach the IMF, which has indicated that it can offer SA in excess of R80bn.

Sunday Times