QUICK MOVES TO STOP THE SAR ROT
SA’s economic titans have moved to counter the fallout over an ANC statement on the Reserve Bank
The country’s economic titans have moved to counter the fallout over an ANC statement on the SA Reserve Bank, with finance minister Tito Mboweni slating “reckless statements” that undermine efforts to stabilise the economy.
The rand took a beating and the markets were spooked following ANC secretary-general Ace Magashule’s announcement on Tuesday that the party’s weekend lekgotla had agreed to expand the mandate of the reserve bank “beyond price stability to include growth and employment”.
“It also directed the ANC government to consider constituting a task team to explore quantity [sic] easing measures to address intergovernmental debts to make funds available for developmental purposes,” Magashule told the media.
Mboweni, Reserve Bank Governor Lesetja Kganyago and ANC head of economic transformation Enoch Godongwana have all tried to contain the damage, with the finance minister saying it was “painful” to see people making “reckless statements”.
Opposing statements on the lekgotla have exposed fissures in the governing party and revived fears about policy uncertainty. Economists are warning that President Cyril Ramaphosa was underestimating the damage and the incident exposed that the state and Luthuli House were not aligned.
Speaking on Wednesday at the launch of new commemorative coins by the Reserve Bank to mark the country’s 25th year of democracy, Mboweni said he was being inundated by calls from international media. “Nobody is talking about changing the mandate of the Reserve Bank. This is clearly stipulated in the constitution. I don’t understand why the obsession about the central bank all the time,” Mboweni said. “Why say things that destabilise the market?”
Speaking to the media after the event, Kganyago said the mandate of the central bank was a “non-discussion” and was being used as a “Trojan horse”.
Kganyago said he could not comment on the statement of any political party, but the conditions did not exist for measures like quantitative easing.
“Inflation must be so low that it threatens to go beyond zero. Interest rates must be so low, borrowers and savers no longer care where interest rates are.
“Only then would it be justifiable for a central bank to explore measures like quantitative easing,” Kganyago said.
On Tuesday Godongwana said it was “inaccurate” that quantitative easing was on the ANC agenda, and there was no decision by the ANC to expand the mandate of the Bank.
Economists say although the ANC’s financial heavyweights have weighed in, this might not be sufficient to counter negative perceptions.
Independent economist Thabi Leoka said Magashule’s comments took the country back to the Zuma era, where policy uncertainty and inconsistencies were the norm.
“He further confused the markets with his comment on quantitative easing, which implies, among other things, printing money. It was clear that the government and Luthuli House are not aligned,” Leoka said.
“Changing the mandate of the Reserve Bank requires amending the constitution, which [Magashule] did not mention.
“This begs the question, does he actually understand the role of the SARB? If this is a sign of things to come, then SA is in trouble,” she added.
Intellidex analyst Peter Attard Montalto said the presidency was “seriously underestimating the ratchet effect of the debate”.
“An official statement from the ANC on mandate change and quantitative easing that is not being rebuffed by the president is sending a very bad signal. Markets know Mboweni and Godongwana’s views and so their interventions, while necessary are not sufficient,” said Montalto.
“Ultimately this is a political issue of the internal fightback and an unholy alliance between rent extractors and the leftists, which needs to be taken headon by the President instead,” he said.
Montalto said it was clear that Ramaphosa did not have control of ANC communications and this needed to be corrected.