Reserve Bank mandate divides opinion across the political spectrum
President’s key allies swap sides on the contentious issue
There have been mixed reactions to the ANC’s announcement that it aims to expand the mandate of the Reserve Bank and explore the use of quantitative easing to deal with government debt.
The Bank has become the subject of a proxy war between the ANC’s Ramaphosa camp and the Zuma fightback faction. Some on the president’s side want the status quo to be maintained, while the fightback faction wants the mandate of the central bank to be tinkered with to include employment and growth.
The party’s alliance partners, the SA Communist Party (SACP) and Cosatu, which both supported President Cyril Ramaphosa in the run-up to the party’s Nasrec conference, have taken a different stance to that of the grouping that backs the president.
The SACP and Cosatu are open to amending the Bank’s mandate, in contrast to finance minister Tito Mboweni and ANC economic transformation subcommittee head Enoch Godongwana, who oppose tinkering with the mandate.
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The SACP says the mandate must include employment growth targeting, with a consequent amendment to the Reserve Bank Act.
Spokesperson Alex Mashilo said in November 2018, at an SACP augmented central committee meeting it was agreed that while the operational independence of the Bank should strictly be respected, the constitution does not recognise the policy independence of the bank.
“The policy mandate of the Reserve Bank must be dovetailed with the transformation and development mandate of the democratically elected government as backed by the electorate on the ballot — and not the reverse,” Mashilo said.
The constitution clearly states that in performing its operational functions, the Bank has to consult regularly with the finance minister, he said.
“The electoral mandate of the current cabinet member [Mboweni] responsible for national financial matters is prescribed in the May 2019 general election manifesto as adopted by the ANC.”
The ANC said in its manifesto it believes the Bank should “pursue a flexible monetary policy regime” and must consider other objectives such as employment creation and economic growth without sacrificing price stability.
The SACP said the ANC and the alliance have to remain loyal to the commitments it made to the people.
It tells us that the ANC is still caught up in its silly, petty fights, instead of focusing on the 3.2% contraction in GDP, the economic downturn and the lost metrosCosatu spokesperson Sizwe Pamla
Mashilo said that as SA’s debt is largely rand-denominated with a relatively smaller proportion denominated in foreign currencies, it “provides us with important room for manoeuvre if we have the courage to pursue a range of possible alternative macro-policy and instrument approaches to dealing with the debt and advancing national production development”.
Cosatu spokesperson Sizwe Pamla said the fact that ANC leaders are arguing over the Bank issue indicates a crisis in the governing party.
“It tells us that the ANC is still caught up in its silly, petty fights, instead of focusing on the 3.2% contraction in GDP, the economic downturn and the lost metros.”
The labour federation had hoped the ANC leaders would put their egos aside and rally around the contentious Bank mandate issue, Pamla said.
“To say the Reserve Bank must play no role in addressing the country’s socioeconomic issues is nonsensical. Of course as Cosatu, we strongly believe the central bank’s mandate has to be revisited.”
He lashed out at Mboweni and Godongwana for suppressing talk on the matter. “It’s silly for people to not want us to even raise this issue. In other countries this is normal.”
Opposition parties have also taken different views on the matter with the EFF calling for the nationalisation of the Bank and the DA vowing to fight in parliament any proposed changes to its independence and mandate.
The DA maintains that the uncertainty around the future of the Bank will rattle investors, dealing a major blow to SA’s already ailing economy.
“We will oppose any changes to the Reserve Bank independence and mandate,” party leader Mmusi Maimane said as he announced his shadow cabinet in parliament on Wednesday.
The DA would continue to hold every exercise of public power by the national executive to account, he said.
“Our work will focus on an agenda for reform. The most pressing of these is the need for urgent economic reform.”
The EFF criticised Mboweni for his stance on the Bank and said he should take seriously what Albert Einstein said about insanity — doing the same thing over and over again, but expecting different results.
“After 25 years of neoliberal policies and practices it is pure insanity to still arrogantly demand the country to implement what has obviously failed,” the party said.
The EFF has been calling for the nationalisation of the Bank and said it will table a bill in parliament accordingly.
It called on the ANC to “show some courage” and implement its own resolutions. /With Luyolo Mkentane