PORTENT

Making a scapegoat of the Reserve Bank for SA’S economic ills masks the real culprit — the state’s incapacity and corruption

minister Pravin Gordhan clarified the Bank’s mandate in a letter to then governor Gill Marcus.

Gordhan made it explicit that monetary policy should be conducted in a “flexible” manner. The Bank should not pursue the goal of keeping inflation inside the band at all costs, and should have regard for growth when it hiked rates.

But he also acknowledged the role of inflation management in supporting sustainable growth. Countries targeted low or stable inflation to reduce the long-term cost of borrowing and provide confidence, stimulating investment, jobs and competitiveness. Low inflation is vital to protect the living standards of workers and the poor.

The key issue, though, is that the only instrument that central banks have at their disposal is their ability to raise or lower interest rates. Because of this, the Bank cannot, in the long run, create economic growth or achieve socio-economic transformation directly.

For that you need fiscal, economic, industrial, trade and other policies. At best the Bank can support their efforts by keeping inflation low and stable — but it is precisely this role that Mkhwebane would seek to eliminate.

For Mkhwebane to suggest a set of responsibilities for the Bank, which it lacks the instruments to achieve, is to destroy the basis for balanced and sustainable growth.