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FIFI PETERS: You will know that it was quite a big political weekend with the ANC having its 111th anniversary. And you’ll know that recently we’ve also had quite a number of senior officials bringing the discussion on the [South African] Reserve Bank mandate to the fore once again, [on] expanding the Reserve Bank mandate once again to that beyond inflation targeting, and one that also takes into account the economy a lot more, as well as jobs.
For a discussion on the Reserve Bank’s mandate and the ANC’s latest bid to expand it I’m joined by political analyst Ongama Mtinka. Ongama, thanks so much for your time. First of all, chief, happy new year. I really hope it’s a great one for you.
ONGAMA MTIMKA: Thank you, Fifi. To you too, and to all of your listeners.
FIFI PETERS: Thank you so much. I’m sure they’re thankful as well. Coming into the show Bloomberg reported that President [Cyril] Ramaphosa has repeatedly downplayed the suggestion that an amendment to the mandate of the Reserve Bank is imminent. We know that the topic came up once again at the conference. We know that there are some who are in favour of it, like ANC chair Gwede Mantashe, as well as the head of economic transformation, Mmamoloko Kubayi, who says the Reserve Bank must pay a lot more attention to the economy and jobs.
But we also know the naysayers say that this would spook investors as the central bank’s independence is considered a strength for South Africa. What do you make of the renewed discussions around the central bank and expanding the mandate and where it goes this time around?
ONGAMA MTIMKA: I think there’s a lot of emotion that gets into the discussion about the role of the central bank in South Africa. In fact it’s not unique to us, but [it occurs] across the developing world, where you find that people have been aggrieved by the way in which monetary and fiscal policy has been conducted at times in ways that seem not to be in favour of the development and imperatives of a particular country, but more or too much in favour of market favourability of an economy. That’s narrowly defined in terms of what speculators want.
What we read from the outcome of the ANC conference is, one, the appreciation that the mandate has got to be broadened because, unlike in the US for example, our central bank has the single mandate of focusing only on monetary stability and exchange control, whereas in the US, for example, employment forms part of the mandate. But that mandate is obviously defined in the Constitution.
And then the second aspect for me, [where] I think that the ANC is not being irresponsibly radical, is that before that resolution about broadening the mandate it seeks to reaffirm the independence of the South African Reserve Bank.
That is to the extent that policy decisions are taken. But it also calls for the bank to be nationalised. Nationalise the bank, respect its independence – that is [for] those acting within the bank and their right to make decisions – but also broaden the mandate.
To me it seems complex and nuanced enough to be as it has been, basically of the making and remaking of central banks in the world, the politicking, the to-ing and fro-ing of the discussions of those that are affected coming up with something that is greater than the constitutive parts.
FIFI PETERS: Politically what would this entail? From my understanding, if the ANC chooses to go ahead with this it will require an amendment [to] the Constitution. For that to happen, this requires a two-thirds majority, the ANC to win a two-thirds majority in parliament. Can you talk to us about those political steps and how successful you think the ANC could be in parliament with its latest bid to expand the mandate of the Reserve Bank?
ONGAMA MTIMKA: On the issue of the change of ownership, that may be an uphill battle that the party will face – especially, Fifi, given the fact that they are approaching an era in which the margin by which they lead as a political party is significantly reducing or declining, and is most likely to drop below 50% come 2024. That’s one [issue]. The potential to successfully change the ownership is an issue.
And then also, the question of financial viability has been raised before, [that] of managing that transition, given all the cost implications that could arise for the process.
But where I think there is a likelihood for a more favourable response is on this question of mandate. None of the political parties in the National Assembly should actually be concerned about the broadening of the mandate of the Reserve Bank to include employment, because we’ve seen, for example, the [inaudible] among other multilateral organisations hosting debates, in which the narrow focus of central banks has been under serious [criticism], especially after the two crises – the global financial crisis in the late 2000s and Covid-19. There are political economic imperatives for broadening the mandate of the Reserve Bank, which in fact should not trigger the same response as wanting to change the ownership of the Reserve Bank.
FIFI PETERS: So you say the other political parties should not be concerned about the broadening of the mandate? But we have seen investors show concerns around this. Last week when the talks were brought to the table again we saw the rand reacting, and the rand reacting negatively to suggestions that this could be going ahead. Do you think that the market and the investors’ concerns are unjustified? And, if so, why?
ONGAMA MTIMKA: I think what may be a cause for concern is the two-pronged nature of the process, the linking of the debate about the mandate to the change of ownership.
By the way, Fifi, it’s not uncommon. The US wants to have a politically tense process of remaking a central bank. The US has been through phases in its history with its own central bank of attempting different things. That’s why, for example, it became slightly different from what it is in the UK, where it’s owned by the public sector. The pushback is part of the necessary part [of] making a central bank that will actually be as responsive to local concerns as it is to investor concerns. It’s part of the part-dependency.
But I don’t think that South Africans should actually pull back from being assertive about what is expected of a central bank because there’s a pushback from investors.
Not that that should be ignored, but it should form part of what makes our remaking process of the central bank not necessarily on the extremes, but it can be a synergistic outcome based on these original positions of both those that are pro-market and a completely narrow mandate, and those that deliver a much broader mandate because it makes economic sense.
There’s lots of economists, as well as the ILO [International Labour Organisation], who’ve actually grappled with this issue and have shown, with proof, that with the broader mandate you could actually get better development outcomes while you are not risking the financial stability of the country.
FIFI PETERS: Ongama, thanks so much for stating your views on this particular matter.
That was Ongama Mtinka, political analyst, on the ANC’s bid to expand the Reserve Bank’s mandate, saying it may not be entirely a bad thing. It’s backed by other economists who say that broadening the mandate to look at economic development targets may also not be a bad thing.
I think we’re going to be having this conversation a lot more throughout the year as we try to get a whole host of views to [form] an informed opinion about where we stand individually.