Ramaphosa calms Reserve Bank ‘nationalization’ fears amid deep divisions in the ANC

Charles Molele

President Cyril Ramaphosa has issued a statement reaffirming the mandate of the South African Reserve Bank, saying the recent public spats in the ANC were not helpful and undermined the confidence of investors.

Following a meeting of the ANC’s national officials bearers, Ramaphosa said that changing the mandate of the central bank was ‘simply not prudent’ at this stage.

“The officials emphasized the policy positions of the ANC on the independence and role of the SA Reserve Bank as set out in the Constitution of the Republic of SA,” said Ramaphosa.

“The Constitution sets the role of the Reserve Bank as protecting “the value of the currency in the interests of balanced and sustainable economic growth.” It further states that this mandate must be exercised in regular consultation with government, through the Cabinet minister responsible for national financial matters. This policy has not changed. It is our desire for the SA Reserve Bank to be publicly owned. However, we recognize that this will come at a cost, which given our current economic and fiscal situation, is simply not prudent.”

On Tuesday, ANC secretary general Ace Magashule said the party’s national executive committee (NEC) agreed to expand the mandate of the SARB beyond price stability to include growth and employment.

However, ANC’s head of economic transformation Enoch Godongwana and the Minister of Finance Tito Mboweni slammed Magashule’s statement, saying no resolution was ever made on the future of the Reserve Bank at the party’s lekgotla.

“To see people undermining it with reckless statements is very painful. Nobody is talking about changing the mandate. It’s clearly stated in the constitution. I don’t understand the obsession with the Reserve Bank and saying things that we know are going to destabilise markets,” Mboweni said at the launch of commemorative coins by the SA Reserve Bank at the Constitutional Court on Tuesday.

 “Government sets the mandate for the SARB. There is no quantitative easing thing here. The primary mandate of the SA Reserve Bank is to “protect the value of the currency in the interest of balanced economic growth and development,” said Mboweni.

The row over the mandate of the SA Reserve Bank has laid bare the deep divisions within the governing party ahead of next year’s National General Council.

Magashule’s faction in the party, supported by former president Jacob Zuma, are planning to revolt against Ramaphosa’s business friendly positions and failure to implement conference resolutions.

The Nasrec conference adopted a resolution calling for the nationalization of the central bank and land expropriation without compensation but moderates in the party are cautious about taking ‘reckless’ and ‘populist’ decisions in the face of slow economic growth.

On Thursday night, Zuma posted a screen-grab of a resolution on the nationalization of the SA Reserve Bank.

“Is there policy uncertainty? Here is a reminder of one of the resolutions at the last ANC elective conference in Nasrec,” said Zuma.

A civil servant who is a visiting researcher in one of the universities who spoke to Inside Politics on condition of anonymity said it seems though that Magashule did not say the mandate of the South African Reserve bank (SARB) should be changed but actually said “it must be expanded beyond price stability to make it an agent in economic transformation and job creation.”

“It is a statement that seems to have touched the nerves of the Minister of Finance and the Governor of the South African Reserve Bank (SARB) as well as the ANC’s head of economic transformation. The two leaders of the ANC as well as the Governor of the Reserve Bank contradicted the ANC’s SG arguing that there are no plans to change or expand the mandate of the SARB. The SG of the ANC got support from unlikely sources, i.e. the Congress of South African Trade Unions (Cosatu) and the South African Communist Party who argued that the mandate of the SARB was no sacrosanct and could be expanded to include economic growth and employment,” he said.

“The question that has not been interrogated at length is whether expanding the mandate of the SARB is something unique to South Africa. A quick scan of some of the major economies shows that this is not a misnomer with the United Kingdom, United States and the People’s Republic of China have accorded their central banks a dual mandate. For instance, the Bank of England (BoE), the central bank of the United Kingdom states that its mandate is to set monetary policy to achieve the UK’s Government’s target of keeping inflation at 2%. It also supports the UK Government’s other economic aims for growth and employment. Sometimes, in the short term, we need to balance our target of low inflation with supporting economic growth and jobs. Basically, the BoE has a dual mandate, i.e. inflation targeting as well as supporting economic growth and jobs.”

He said the United States’ Federal Reserve also has a dual mandate, which is to “promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates.”

In countries like China, the People’s Bank of China, the People’s Republic of China, has a dual mandate as well, such as maintaining price stability and promoting growth through the management of monetary policy. “Having satisfied ourselves with the international best practices, i.e. with the experiences of London, Washington and Beijing, it can be concluded that central banks in major economies have realised that managing inflation in their monetary policy alone is not enough hence the inclusion of growth with employment. Having sailed through the economic history of monetary policy, it will be important to now venture into the politics of it. The intervention from the former Deputy President of the ANC, Mr Kgalema Motlanthe, where he argued that the leaders of the ANC should always speak with one voice, i.e. they need to carry the same message and that to achieve that there should be no holy cows,” he said.

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