The ANC and its allies agreed to look at broadening the mandate of the central bank from merely tackling inflation, ANC secretary general Gwede Mantashe said on Sunday.
Mantashe told reporters the alliance, which includes the South African Communist Party and the Congress of South African Trade Unions, had formed a team to study the effects of a strong rand, following warnings about the repercussions of its strength on the economy.
The ANC and its allies met for three days to iron out their differences, with the government under pressure to shift economic policy to the left.
Cosatu and the SACP want higher spending and for the inflation targets that guide monetary policy to be scrapped.
Mantashe said the partners had agreed at a ”robust” meeting to look at the central bank’s mandate.
”The summit agreed that the alliance task team on macroeconomic policy must remain seized with reviewing and broadening the mandate of the Reserve Bank,” he said at a briefing after the meeting, adding that monetary policy should be in line with the aims of fiscal policy.
The Reserve Bank has the task of fighting inflation, keeping it between 3% and 6%. In September, inflation was 6,1% year-on-year, compared with almost 14% a year ago.
Critics say this had led to interest rates that are too high, which Cosatu blames for exacerbating poverty. They want the target scrapped and interest rates cut to help pull the economy out of its first recession in nearly two decades.
The central bank has cut its repo rate — its base lending rate — by five percentage points since December despite inflation still being outside the band, although at 7% it remains high by global standards.
Weaker rand
Cosatu and the SACP want the government to intervene to weaken the rand, which has firmed more than 20% against the dollar and gained sharply on the euro this year.
”We are looking into this because if this [global] crisis is encouraging imports and not exports, it deepens our crisis,” Mantashe said.
The central bank and Finance Minister Pravin Gordhan have warned of the effect of the gains on export sectors and the economy in general, but have stressed the policy of a floating exchange rate will stay.
Economic Development Minister Ebrahim Patel this month agreed to a debate on the rand.
Cosatu president Sidumo Dlamini told Reuters the allies would continue discussing its proposal, raised at the meeting, that the alliance and not the ANC, be the centre of political power.
This would shift power away from the party, giving Cosatu and Communist Party greater influence by making them more directly responsible for setting government policy. Such a change, if it happened, could unsettle foreign investors.
Earlier media reports said many ANC officials were opposed to the plan.
Mantashe said the meeting endorsed Trevor Manuel as head of the National Planning Commission (NPC).
Manuel is unpopular with the left for his relatively conservative fiscal policy during more than a decade as finance minister, but is respected by investors who want him to remain a key player.
The NPC — announced in May but yet to start work — will use a panel of experts to guide overarching government policy. – Reuters