At its national conference in Bloemfontein in December 2012, one of the ANC’s resolutions on macroeconomic policy read: “SA requires a flexible monetary policy regime, aligned with the objectives of the second phase of the transition. Without sacrificing price stability, monetary policy should also take into account other objectives such as employment creation and economic growth.”
In December 2017, the party’s national conference in Johannesburg reaffirmed the resolution. It also said: “It is, however, a historical anomaly that there are private shareholders of the Reserve Bank. Conference resolves that the Reserve Bank should be 100%-owned by the state.”
Earlier in January, the ANC’s elections manifesto repeated the resolution in a one-paragraph statement on macroeconomic policy. The media then started to conflate unrelated issues. An ENCA journalist asked ANC secretary-general Ace Magashule an absurd question: Is the ANC’s manifesto statement that there should be a more flexible monetary policy different to what the ANC had resolved to nationalise the SA Reserve Bank? Magashule said the bank would be nationalised in the next five years.
At a pre-World Economic Forum breakfast in Rosebank, President Cyril Ramaphosa reaffirmed his party’s commitment to the independence of the Bank. An article on the Daily Maverick website said Ramaphosa had directly contradicted Magashule. In a bizarre statement, it said Magashule had said the proposed flexible monetary policy meant that the bank would be nationalised.
However, nationalisation, the independence of the Bank and its mandate are three different issues. There was no contradiction between Ramaphosa and Magashule. Most central banks in the world are nationalised and independent. A flexible monetary policy has nothing to do with the issue of nationalisation. You can have one without the other. Also, nobody has claimed that nationalisation is required to enable the Bank to change its policies. These are separate and unrelated issues.
It is not clear why the ANC is taking so long to start the process of nationalisation. The Bank’s shares are worth about R20m and it seems clear that making money is not the major objective for most shareholders. The majority would probably accept an offer that is at least double the current share price. Nationalisation is affordable. The minority who want to hold out for more could take the government to court.
The Bank has mismanaged monetary policy for the past three decades, with punitive, usurious real interest rates of 9% between 1994 and 2009. After a lost decade in terms of economic development, SA is in its worst post-apartheid economic crisis, with 9.8-million unemployed people. The time has come for a change in monetary policy. The Bank must have a broader mandate, like the central banks in the US and New Zealand.
The current inflation targeting policy — of one tool (interest rates) and one target (the inflation rate) — is not appropriate for a country at SA’s level of development. In many developing countries, central banks have used multiple policy tools to achieve multiple developmental objectives and targets. The policy tools have included differential reserve requirements and interest rates, capital controls to influence the exchange rates and directing credit to priority sectors of the economy. The developmental targets have included economic growth, employment and the exchange rate.
The Bank says it has implemented flexible monetary policies. Governor Lesetja Kganyago points to the constitution, which reads: “The primary objective of the Reserve Bank is to protect the value of the currency in the interest of balanced and sustainable economic growth”.
However, the Reserve Bank cannot have its cake and eat it. Answering questions after the Bank’s recent monetary policy announcement, Kganyago referred to the Bank’s primary and ancillary objectives. The implication was that economic growth was ancillary. The constitution makes no such distinction. “You need price stability to achieve balanced and sustainable economic growth,” he said.
For as long as I can recall every Bank governor has said economic growth and employment are structural issues that monetary policy cannot address. This is an ideological view that is out of line with the experience of many developing countries, where central banks played a critical role in economic development and job creation.
• Gqubule is founding director at the Centre for Economic Development and Transformation.
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