Ahead of Davos, Ramaphosa reassures business on Reserve Bank’s role
The president and finance minister Tito Mboweni are in agreement that the independence of the central bank is non-negotiable
Ahead of his trip to promote SA as an investment destination at the World Economic Forum (WEF), President Cyril Ramaphosa moved to assure business that the ANC had no intention to tamper with the central bank’s independence or mandate.
"The independence, standing and the role of the Reserve Bank is sacrosanct and will remain independent," he told business leaders on Wednesday. "There should be no debate about that."
Ramaphosa’s comments came a day before governor Lesetja Kganyago delivers the latest interest rate decision, with the monetary policy committee (MPC) likely to keep the repo rate unchanged at 6.75%, after raising it at the last meeting in November for the first time in two years.
The central bank, which has a 3%-6% inflation target rate, has come under fire from trade unions and elements in the ANC, who have accused it of being insensitive to a weak economy that has left the unemployment rate at more than 27%.
Kganyago has consistently argued the Bank’s constitutional mandate to limit inflation can support growth by reducing the cost of capital for industry and government.
Bank policy has also got caught up in factional fights within the ANC, a factor that was brought to the fore over the weekend when the party released a manifesto saying that policymakers should consider growth and employment in setting policy.
Reflecting disagreements within the party, that statement made it into the manifesto despite Ramaphosa and finance minister Tito Mboweni insisting the Bank already did that.
"The manifesto had a paragraph on a wish and an aspiration, acknowledging that the Reserve Bank is independent and that there is no intention to tamper or tinker with the independence of the central bank," Ramaphosa said.
"The wish that is expressed is that as it goes ahead with monetary policy machinations, it will keep an eye on employment," the president said.
Speaking at the same event, Mboweni said there was no need to panic "A look at economies across the world will show that the macroeconomic outcomes are much better in countries with independent central banks," he said.
Ramaphosa also sought to reassure investors on the country’s land reform programme, saying there would be no land grabs and that the policy would not be implemented in a "vengeful manner".
Ramaphosa will be attending the forum in Davos, Switzerland, which brings together leaders from government, business and civil society, for the first time as president, hoping to bolster his drive to attract $100bn of investment by 2023. He has sought to fix a relationship with business that was strained during the presidency of Jacob Zuma.
"We have had strong and continuous interactions with the SA leadership and we have found a sincere desire from government and the private sector to position SA as a role model," WEF MD Murat Somnez told Business Day on Tuesday.
All economists polled by Bloomberg expect the repo rate to remain unchanged at 6.75%.
Analysts said they did not expect the manifesto comment, which fell short of calling for a change in the Bank’s mandate, to have a bearing on the MPC. "The ANC manifesto will not necessarily be implemented," said Nedbank chief economist Dennis Dykes. "It’s a possibility rather than a strict resolution."