FIRST TAKE: Ramaphosa must act over Magashule's disastrous SARB statements

2019-06-05 08:32
ANC President Cyril Ramaphosa and Ace Magashule during the registration of new Members of Parliament. (Photo by Gallo Images/Netwerk24/Adrian de Kock)

ANC President Cyril Ramaphosa and Ace Magashule during the registration of new Members of Parliament. (Photo by Gallo Images/Netwerk24/Adrian de Kock)

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The governing ANC's apparent "decision" to expand the mandate of the South African Reserve Bank and the subsequent chaos over whether it's true, if it's going to happen or indeed who made the decision is nothing short of abject disaster.

In the space of a couple of hours government was instructed to follow Zimbabwe-style economics by Ace Magashule, a man accused of running his own gangster state while Free State premier, but then rebuked by Tito Mboweni, the finance minister, who opted to take to social media rather than official Treasury communication.

And in the middle of that malaise Enoch Godongwana, the ANC's economic head, denied Magashule's statement that a decision about the SARB had been taken.

What to make of this? One thing is certain: the markets, ratings agencies, local and international investors and pension fund managers will be looking at this and say: what the hell is President Cyril Ramaphosa's government doing? Who is running the show? Do they know what the repercussions are going to be?

Thanks to the disastrous years of capture and corruption facilitated by former president Jacob Zuma and his cronies – many of whom are still in the ANC's leadership – South Africa has suffered under consistent policy drift. Year after year Treasury's technical assessments of the state of the economy and the need for policy certainty have fallen on deaf ears, or rather ears too busy with factional fighting and looting to care.

Our state-owned enterprises present a clear risk to fiscal stability, our budget deficit is unsustainable, debt is spiralling, investment is stagnant and falling, the public sector wage bill is debilitating, and policy pronouncements are muddled and contradictory, Treasury has warned.

Yesterday's events are the very public manifestation of the extent of the extreme factional divides inside the ANC, barely a month after an election where the party lost five percentage points in support, two weeks after Ramaphosa was inaugurated and less than three weeks before the opening of Parliament. It lays bare the chaotic policy making structures which have been responsible for an economy in which the GDP this quarter showed the biggest quarterly contraction in a decade: 3,2%.

And it showed how Ramaphosa is actively being challenged inside the party.

Mboweni, strident on social media and so convinced of his case, will this morning have to use the clout and standing of National Treasury to reject and condemn Magashule and the ANC national executive committee's statement. He must tell South Africans that printing money – Magashule's "quantity easing" – is not government policy and not the policy of a responsible state wanting to improve the economy.

And Lesetja Kganyago, the SARB's street smart governor, will have to emphasise the SARB's independence for the umpteenth time and explain the function and role of a central bank in an economy, something that Magashule and his fellow travellers apparently do not understand.

But Ramaphosa's reaction to all of this will be the most instructive. The Constitution empowers him and his Cabinet, in this case the finance minister, with executive authority. Not Magashule, who presided over calamitous governance in the Free State when he was premier.

The president must act visibly and he must act forcefully if he is to mitigate the significant damage that has already been done. The SARB's mandate is stipulated in the Constitution, it is not changed at a whim in a decrepit ballroom at St George's Hotel with economic amateurs like Magashule and Nomvula "pick up the rand" Mokonyane. And Ramaphosa needs to say so.

Read more on:    tito mboweni  |  ramaphosa  |  lesetja kganyago  |  cyril  |  ace maga­shule  |  sarb
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