Reserve Bank mandate sacrosanct, ANC vows
Party manifesto states monetary policy must take employment, economic growth into account
The ANC insists that it will not tinker with the mandate of the SA Reserve Bank, despite its election manifesto stating that monetary policy has to take employment and economic growth into account.
Enoch Godongwana, the party’s head of economic transformation, told Business Day that the intention behind the promise on the Bank was “to improve co-ordination between fiscal and monetary policy”.
However, analysts have warned that the manifesto points to uncertainty about the party’s commitment to the Bank’s independence.
While the manifesto speaks to the mandate of the central bank, its mandate cannot be changed without an amendment to the constitution.
The governing party says in its manifesto: “The ANC believes that the SA Reserve Bank must pursue a flexible monetary policy regime, aligned with the objectives of the second phase of the transition. Without sacrificing price stability, monetary policy must take into account other objectives such as employment creation and economic growth.”
Finance minister Tito Mboweni, a former Bank governor, said there was “nothing new” in the manifesto, as the Bank “has always pursued monetary policy in a flexible manner and has always taken the optimal health of our economy into consideration”.
However, the independence of the Bank has been under attack in recent years and is at the heart of the policy differences between the faction aligned to former president Jacob Zuma and the grouping supporting President Cyril Ramaphosa. The ANC resolved at its 2017 elective conference to nationalise the Bank.
The Bank had to go to court to nullify an instruction by public protector Busisiwe Mkhwebane, who instructed parliament in 2017 to change its primary mandate, which is to protect the value of the rand in the interest of balanced and sustainable growth.
The matter hardly bodes well for investor confidence, particularly in a year in which there is uncertainty around the leadership of the Bank.
Governor Lesetja Kganyago’s first term ends in November, and the Bank also needs to find a new deputy governor following
Francois Groepe’s resignation in December 2018. Fellow deputy Daniel Mminele’s second term ends in June.
The Bank has yet to appoint a replacement for monetary policy committee member Brian Khan, who retired in 2018.
Kganyago has indicated that he would be willing to stay for a second term if he was asked to do so.
Godongwana said that according to the Nasrec resolution, the mandate of the central bank is sacrosanct and this could not be amended through a manifesto. “The intention is to properly coordinate fiscal and monetary policy to achieve the objective of growth and employment.”
The chief economist at Econometrix, Azar Jammine, said the manifesto showed that there remained support within the ANC for what could be interpreted as interference in Bank policies.
Interfering with the independence of the central bank was very dangerous, but the government did not always “fall for what the ANC said”.
Jammine said it is possible that this view in the ANC could influence the appointment of a new Bank governor. However, Kganyago is highly respected both locally and internationally.
An independent analyst said that while the manifesto promise was written “sensibly and with sensitivity”, it does not “alter the fact that essentially you have a political party commenting on the role of what should be a fiercely independent institution”.
He said it would be constructive if the intention was to simply co-ordinate monetary and fiscal policy. “Policy has to be coordinated; it is fruitless if they worked against each other.”
The Bank itself would not be drawn on the matter as it is set to hold a monetary policy committee meeting this week and has entered its blackout period.
THE BANK IS ALSO YET TO APPOINT A REPLACEMENT FOR MONETARY POLICY COMMITTEE MEMBER BRIAN KHAN
Poll plans: Former president Jacob Zuma and President Cyril Ramaphosa at the ANC’s election manifesto launch at the Moses Mabhida Stadium in Durban on Saturday. The ANC is the first party to deliver its election manifesto ahead of what is seen to be the most hotly contested polls since 1994.