The Reserve Bank’s mandate does not need to be changed: Secretary of the Treasury

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South African Finance Minister Enoch Godongwana said the central bank’s constitutional mandate to maintain price stability is sufficient to promote job creation, suggesting there is no need to extend that directive.

The head of the economic transformation committee of the ruling African National Congress last week raised the prospect of extending the mandate of the South African Reserve Bank to create more jobs and support transformation in the country’s financial sector.

Godongwana chaired the committee’s discussions on the issue at the ANC’s five-yearly policy conference last weekend.

“The Reserve Bank’s mandate is enshrined in the constitution” to maintain price stability in the interest of economic growth, he said in an interview on Sunday. “You can say then that in maintaining that stability for the sake of growth you have to take that growth into account in generating employment, so there’s nothing wrong with that.”

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Godongwana’s comments are further evidence that President Cyril Ramaphosa, who is expected to run for a second term as ANC leader at an election conference in December, has managed to keep his economic policies intact despite opposition from within the party.

A document seen by Bloomberg showed support for his plans to boost private participation in infrastructure and energy investments.

The central bank’s mandate has been a hot-button issue for the ANC, with opponents of its policy saying it focused too much on inflation at the expense of job creation.

South Africa has an unemployment rate of 34.5% – the highest on a global list of 82 countries monitored by Bloomberg. The Thomas Piketty-supported World Inequality Lab ranks South Africa as the world’s most unequal nation for which wealth data is available.

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That’s a legacy of the apartheid system that limited economic opportunities for black South Africans, who make up about four-fifths of the population, in favor of the country’s white minority.

The head of the ANC’s economic transformation committee, Mmamoloko Kubayi, also pointed to the prospect of greater engagement between the central bank and the Treasury Department on policy issues. Godongwana said he communicates regularly with central bank governor Lesetja Kganyago.

“I have no problem writing a letter to Lesetja, but I cannot give instructions to Lesetja, the constitution does not allow me,” Godongwana said. “We see each other regularly, so I’m happy with the interaction.”

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Other issues raised by the committee at the ANC conference included:

  • Introducing a wealth tax as a possible way to minimize income and wealth inequality in South Africa
  • Feasibility studies on adding new refinery capacity after closing existing facilities
  • The need to ensure that gas and nuclear are regarded as energy sources, despite opposition from some critics who favor the exclusive use of renewable energy.

The issues raised by the committee will be discussed at the ANC’s election conference in December, when it will appoint officials to lead the party for the next five years.


Read: ANC Proposes Major Changes to Reserve Bank – Including Nationalization