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Reserve Bank debate: Who said what?

Jun 06 2019 10:51
Fin24 team

On Tuesday, ANC secretary general Ace Magashule gave a scheduled press briefing at Luthuli House in Johannesburg about the outcomes of the party's national executive committee’s Lekgotla over the weekend. 

Magashule said the NEC - the ANC's highest decision making body between conferences - had agreed that the Reserve Bank’s mandate should be expanded beyond price stability to make it an active agent in economic transformation and job creation.

"[The NEC] also directed the ANC government to consider constituting a task team to explore quantity easing measures to address intergovernmental debts to make funds available for developmental purposes," he said in a statement. 

Magashule's statement was contradicted by Enoch Godongwana, also an NEC member and the head of the ANC's sub committee for economic transformation. Godongwana told TimesLIVE on Tuesday evening that Magashule's statement was inaccurate, and that there was no decision to expand the Reserve Bank's mandate.

Godongwana's statement has not been published on the ANC's website however, which only contains Magashule's views. President Cyril Ramaphosa has not commented on the matter. 

'Exasperation' 

Finance Minister Tito Mboweni, in a Twitter post on Tuesday, wrote that he was reaching a point of "total exasperation with [...] continued attacks and obsession with the South African Reserve Bank".

"Let us leave the South African Reserve Bank alone to pursue its mandate without fear, favour or prejudice," he wrote. 

On Wednesday, at an event to launch a new set of commemorative Mandela coins, Mboweni said that nobody was talking about changing the mandate of the Reserve Bank, according to TimesLIVE, contradicting Magashule. 

Reserve bank governor Lesetya Kganyago, meanwhile, who has in the past also argued that changing the bank's mandate would mean altering one of the principles underpinning the Constitution - said on Wednesday that the conditions for quantitative easing did not exist in South Africa. He was replying to Magashule's statement about 'quantity easing', though to be a misspelling of quantitative easing. 

Kganyago, according to CNBC Africa, said for quantitative easing to be an option for a central bank, inflation must be so low that it threatens to go below zero, while interest rates must be very low or near zero. "These conditions do not exist in South Africa," he said.

ANC alliance partners Cosatu and the South African Communist Party, meanwhile, both came out in support of expanding the bank's mandate. 

"We remain unwavering in our argument that the SA Reserve Bank cannot afford to continue to only focus on price stability, as pursued through inflation targeting but should consider broader economic development imperatives," said Cosatu in a statement. 

The rand dropped in the wake of Magashule's announcement. NKC African Economics, in a note to clients on Thursday, said Magashule appeared to be "spoiling for a fight in a clear attempt to establish Luthuli House, rather than government, as the real centre of power in the ANC".

Public Protector 

This is not the first time that the mandate of the central bank has been contested in the open. In 2017 Public Protector Busisiwe Mkhwebane ordered the Constitution be changed to alter the bank's mandate. Her controversial order was included in a remedial report she published in June 2017. The report also found that Absa had to pay back R1.25bn in the co-called Bankorp bailout matter. This was later set aside by a court.

The order to change the bank's mandate resulted in a surge of criticism. The Reserve Bank instituted an urgent court application to have the section changing its mandate set aside. Mkhwebane, in the end, decided not to oppose the review application and the mandate wasn't altered. 

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