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Analysts debate Reserve Bank mandate

7 June 2019 8:04 AM
Tags:
ANC
Ace Magashule
Reserve bank

Pundits debate Sarb's role following a spat between ANC secretary-general Ace Magashule' and other party members.

The African National Congress (ANC) secretary-general Ace Magashule's announcement that the national executive committee (NEC) lekgotla decided that the mandate of the Reserve Bank is expanded to include growth and employment, sparked a debate on whether the Reserve Bank should have a dual mandate.

Read: ANC Sarb spat takes to Twitter: 'Is there policy uncertainty?' tweets Jacob Zuma

Several party heavyweights disputed Magashule's stance and reassured investors that Reserve Bank's mandate would not be expanded.

On Thursday President Cyril Ramaphosa released a statement reaffirming the mandate of the reserve bank, describing the current spat as "not helpful".

Also read: ANC contradicts the ANC on economy while South Africans get poorer and poorer

To discuss the mandate of the Reserve Bank, Bongani Bingwa speaks to Centre for Economic Development and Transformation founding director Duma Gqubule and Wits School of Business head professor Jannie Rossouw.

I think we should change the mandate and the reason for that is that in 1997 former England Reserve Bank governor Mervyn King said: 'Inflation matters are people who only look at inflation and not other issues like employment and the economy.' Two decades later most central banks in the world do not just look at inflation. If you look at the past few months, global growth is slowing down and every central bank in the world is looking to cut interest rates and ours is not.

Duma Gqubule, Founding director - Centre for Economic Development and Transformation

He says India on Thursday cut its interest rates for the third time this year because the country's growth rate fell to 5.4% and that is not enough to create growth that will create jobs for 11 million people.

Rossouw says the Reserve Bank should aim at containing inflation because inflation makes everyone in the country poorer.

You cannot compare South Africa to other countries. Inflation is not a policy instrument. The Reserve Bank is ideally suited to contain inflation. When South African tried what Magashule is talking about, things went horribly wrong.

Professor Jannie Rossouw, Head - Wits School of Business

If the bank wasn't independent, it would have been a victim of state capture.

Professor Jannie Rossouw, Head - Wits School of Business

Listen below to the two pundits discuss their thoughts on what should happen to the Reserve Bank:


7 June 2019 8:04 AM
Tags:
ANC
Ace Magashule
Reserve bank

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