SACP proposal set to stir policy pot

● A bitter fight is brewing in the tripartite alliance over economic policy, with the SA Communist Party (SACP) proposing an overhaul of macroeconomic policy and calling for the mandate of the Reserve Bank to be expanded to help economic growth and to make it possible for the Bank to print money.

In a discussion document for its December congress seen by Business Times, the party wants the mandate of the Bank expanded beyond price stability to focus on “balanced economic growth”, as SA’s constitution already stipulates.

While it has scoffed at calls for the wholesale nationalisation of the Bank, it has launched a blistering attack on the central bank’s governors for aggressively protecting its independence and insisting on sticking to narrow inflation targeting.

“Successive Reserve Bank governors have conducted themselves as if they were ministers of finance making macroeconomic policy,” the SACP writes in a special edition of its internal bulletin, Bua Komanisi, prepared for its December congress.

“But this interpretation of Reserve Bank independence is increasingly outdated, even in most developed capitalist economies.”

Disagreements over the mandate of the Reserve Bank boiled over in June when ANC secretary-general Ace Magashule told journalists that a national executive committee lekgotla had agreed to expand the mandate of the Bank to include growth and employment. The head of the party’s economic transformation subcommittee, Enoch Godongwana, was forced to issue a statement denying this.

The SACP’s proposals are likely to add to uncertainty on economic policy, which has been cited by ratings agencies and other observers as a risk factor in a country with a less than 1% growth rate and almost 30% unemployment.

The proposals also come a year before the ANC is to hold its national general council, a midterm review of policies and their implementation.

The SACP backed President Cyril Ramaphosa’s winning campaign in 2017, along with labour federation Cosatu and ANC members who were disgruntled by mismanagement and corruption under Jacob Zuma. But divisions have emerged, especially over the country’s economic direction.

Last month, the National Treasury released a paper titled “Economic Transformation, Inclusive Growth and Competitiveness: Towards an Economic Strategy for SA”, which set out controversial proposals to revive the economy. It irked the ANC’s allies on the Left, who bemoaned the lack of consultation by finance minister Tito Mboweni.

In its own document, the SACP slams Mboweni for making suggestions on microeconomic policy while “remaining almost entirely silent on macroeconomic policy”.

To counter that, the ANC’s alliance partner suggests overhauling the central bank’s mandate to enable it to introduce what the communists term “quantitative easing with South African characteristics”. This, they say, would make it possible for the Bank to print money to, for example, purchase randdenominated debt held by the Public Investment Corporation (PIC), on condition that it uses the extra cash to “invest in productive areas”. The SACP asserts that traditional quantitative easing — which entails a central bank loosening the money supply by dropping interest rates close to zero to encourage spending — is not suitable for SA.

The “quantitative easing” it proposes would lead to a “structurally transformative deployment of the massive public wealth controlled by the PIC”. The SACP says it doesn’t make sense for the PIC to use the money of government pensioners to invest in “profit-maximising commercial assets” instead of developmental initiatives that could transform the economy’s structure.

Reserve Bank governor Lesetja Kganyago has consistently emphasised that bringing down inflation and maintaining price stability is crucial to underpin growth and incomes, with high inflation hitting poor peole hardest.

... Reserve Bank independence is ... outdated

Bua Komanisi

SACP internal bulletin