The Congress of South African Trade Unions (Cosatu), which has been meeting with African National Congress representatives in Cape Town, says it virulently opposes relaxation of exchange controls — and “speed bumps” should be put in place to protect the economy.
At a press conference after the central executive committee met in Cape Town, Cosatu secretary general Zwelinzima Vavi said it has been a misinterpretation of the union movement’s position that it accepted the relaxation of exchange controls.
“Exchange controls must remain,” he said, arguing that relaxed controls will lead to money leaving the country that will never return.
He was responding to comments made by South African Reserve Bank Governor Tito Mboweni that the National Union of Mineworkers (NUM) has accepted inflation targeting and the relaxation of exchange controls.
Vavi said: “The NUM clarified its position … that it made no such call for the relaxation of exchange control. But it pointed out a range of measures that can be looked at by the Reserve Bank, including interest rates and buying of the dollar to improve reserves.
“Unfortunately the Reserve Bank, I think for opportunistic reasons, picked up on the mentioning of the exchange rate as part of the measures that he may consider … to suggest that there is a big policy shift by the trade union movement with regards to the question of exchange controls.
“We wish to state categorically that our position has not changed.
“We would have preferred that exchange controls be left at the level that they were. We can see no better policy mechanism to protect our country from a situation where capital will be moved out of the economy and never to return.
“In addition to that we are calling on the Reserve Bank to consider ‘speed bumps’ that were introduced in Asian countries to protect the country against certain investors who come to attack our currency for [the] short term and cause volatility that we saw in 1997.”
With regard to inflation targeting he said: “This is where our major difference is with the Reserve Bank and to a certain extent with the government. The governor [Mboweni] will not consider the use of the exit route to deal with the current crisis over the overvaluation of our currency.”
The pursuance of a particular rate of inflation “has unfortunately been rated as the key objective of monetary policy of the Reserve Bank. Inflation targeting is the key target but the key target should be job creation and dealing with apartheid inequalities. Inflation targets should be subordinate to those overall aims.”
Unfortunately in South Africa the targets of unemployment and economic growth “seem to be subordinated to inflation targeting… which is a great error”.
Mboweni told members of the finance committee of the National Assembly last week that it was overlooked that the NUM, the largest trade union in the country, made a ground-breaking move to call for the abolition of exchange controls and by not opposing inflation targeting.
He said: “This was a ground-breaking move, and also a major policy development, that the NUM didn’t oppose inflation targeting.” — I-Net Bridge