Reserve Bank governor Lesetja Kganyago on Thursday said the bank’s mandate already included a focus on “balanced and sustainable growth”, which was enshrined in the Constitution.
“Anyone who says that the SARB [South African Reserve Bank] must focus on growth has clearly not read the Constitution, because the Constitution says what we do is in the interests of balanced and sustainable growth,” he said. “The fathers and mothers of our Constitution took the view that, for you to have balanced and sustainable growth, you need price stability.”
His remarks follow the release of the ANC’s election manifesto, which said the SARB “must pursue a flexible monetary policy regime, aligned with the objectives of the second phase of transition”.
“Without sacrificing price stability, monetary policy must take into account other objectives such as employment creation and economic growth,” it said.
The pronouncement follows on from a policy resolution taken at the ANC conference at Nasrec in December 2017 to nationalise the central bank, which was seen at the time as a concession to populists in the ruling party and the faction aligned to former president Jacob Zuma.
An independent central bank was one of the underpinnings of the Constitution, Kganyago said, and to change its mandate would require a change to the Constitution.
He also distinguished between the debate on the SARB’s mandate and questions about its nationalisation and the role of private shareholders.
When legislation to nationalise the bank and do away with its private shareholders was considered by Parliament, the SARB would participate in that process, he said, although it would do so “with the clear intention” of protecting the bank’s mandate and its independence.
He welcomed comments by President Cyril Ramaphosa and Finance Minister Tito Mboweni that the independence of the bank was sacrosanct. “May it remain so, that our independence, as enshrined in the Constitution, will be left as it is,” he said. Fears that the proposals in the manifesto amount to another attack on its independence have not been allayed by mixed messaging from the government and ANC leaders.
Although Ramaphosa gave assurances that the bank’s independence was safe during a breakfast meeting before the World Economic Forum, ANC general secretary Ace Magashule told the news channel eNCA that the Nasrec resolutions would be implemented “without flinching” in the coming five years.
But Enoch Godongwana, chairperson of the ANC’s subcommittee on economic transformation, said it was “incorrect to argue that, by raising a debate about monetary policy, we intend to interfere with the independence of the Reserve Bank”.
The ANC’s manifesto emphasised the co-ordination of fiscal and monetary policy to address growth and unemployment, he said. Inflation targeting itself was a political decision and no one accused the government of interfering because the markets liked the policy, he said.
But Cas Coovadia, the managing director of the Banking Association South Africa, cautioned political parties, and the ruling party in particular, to recognise the economic crisis in South Africa.
“The rhetoric thus needs to be measured to ensure it does not spook potential investors and those already invested in the country, both local and global,” he said.
Monetary policy and its implementation were not the critical inhibitors to economic growth. Instead, political uncertainty, the serious issues in the parastatals, particularly in Eskom, and a seeming inability to take the hard decisions to address them were, Coovadia said.