For something that is often cited as one of the country’s key strengths, the Reserve Bank doesn’t feature that prominently in last week’s report by Moody’s Investors Service.
There is the usual comment about how the central bank’s “adherence to its inflation and financial stability mandate supports effective macroeconomic policy”, but little else that is specific. Which is a bit of a surprise, considering that the Bank could potentially be on the cusp of some major changes.
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With everything else that President Cyril Ramaphosa has had to worry about, it seems the Bank has similarly fallen under the radar as far as his priorities go. Earlier in 2019, we were led to believe that a replacement for Francois Groepe, who announced his resignation as a deputy governor at the end of 2018, would be in place by the March meeting of the monetary policy committee.
With everything else that President Cyril Ramaphosa has had to worry about, it seems the Bank has fallen under the radar as far as his priorities go.
March came and went, and there won’t be an announcement before this week’s monetary policy committee meeting, which is scheduled to end two days before the presidential inauguration. That is likely to be followed by the announcement of a new cabinet, possibly a week from today, and whoever is the new minister of finance will have the job of recommending the deputy governor to Ramaphosa.
Rather than neglect, the delay may well be because they have struggled to find an appropriate candidate, who also fits the demographic profile they are looking for.
Governor Lesetja Kganyago has indicated in the past that he would prefer a woman candidate since the remaining deputies — Daniel Mminele and Kuben Naidoo — are both men. In fact, Fundi Tshazibana, who advises the governors, is the only woman on the five-person monetary policy committee. The other member is Rashad Cassim, head of the economics department.
In theory, there is another vacancy on the the committee, because Brian Kahn, the former adviser to the governor who attended his last meeting in September, is still to be replaced.
The Bank’s website still refers to the committee as having seven members. It also talks up the benefits of having diverse voices to ensure that “there is likely to be some moderation of extreme positions and policies and more even policymaking”.
That would imply that the quality of debate will have suffered somewhat in the most recent couple of meetings. And, assuming there’s no new member unveiled on Thursday, it’s possible there might even fewer voices at the next meeting, scheduled for July 16-18. Mminele’s second five-year term will have ended by then, and so he could also be gone, taking up the number of critical positions that need to be filled.
Three out of seven is a substantial number that could change not just the nature of the debate but also the ultimate decisions. There is another reason why individual changes in the committee might be more crucial than in previous years.
On the face of it, the headline in City Press on Sunday didn’t seem to offer too much that was earth-shattering. ANC secretary-general Ace Magashule apparently warning the government to act fast on election promises seemed to be more of the same.
But a closer reading seemed to suggest that the penny had dropped on two important issues that dominated discussions in the buildup to the elections.
Policy changes proposed by branches, such as the expropriation of land without compensation and the nationalisation of the Bank, would not form part of the new administration’s main priorities in its first 100 days. Which, shockingly, was a sensible statement from Magashule. It seemingly acknowledged that the ANC’s showing in the election suggested that there was no mandate for either policy.
If accurate, it would indicate the land debate, which did so much to harm sentiment in 2018, has been kicked into touch. The same with the Bank ownership controversy. Or could there be a more sinister explanation?
It may well be that Magashule and his faction have finally worked out that the debate about the Bank’s ownership was always an unnecessary distraction since its private shareholders have no say on policy. It was never clear what the whole potentially costly exercise was to achieve.
The Bank’s mandate is enshrined in the constitution and it implements an inflation policy set by the government, not by shareholders. So if you want to influence it, the prize has to be the people making policy decisions. And if the ultimate goal was to use the ownership issue as a ruse to go for its mandate, then an ANC further away from the magical two-thirds majority makes that so much harder to achieve.
If this is institution is one of the few strengths we have — that Moody’s report did not make easy reading otherwise, with our debt trajectory going in the wrong direction, and comparing us unfavourably with the likes of Hungary and the Bahamas — it’s imperative that Ramaphosa acts quickly to ensure the stability of its leadership.
I didn’t even mention that Kganyago’s term is due to end in November. If he’s still up for another term, as indicated, and Ramaphosa is minded to keep him, it might be good to sign him up now.
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