Guest Column

Who governs South Africa while policy chaos reigns?

2019-06-07 08:00
File photo of Lesetja Kganyago. (Getty)

File photo of Lesetja Kganyago. (Getty)

Multimedia   ·   User Galleries   ·   News in Pictures Send us your pictures  ·  Send us your stories

Adoption of the approach suggested by Ace Magashule will take South Africa back to the bad old 1980s of the previous century. In the 1980s, the SARB was subservient to the governing National Party, writes Jannie Rossouw.

The word "chaos" has many synonyms - for instance, confusion, pandemonium, disarray and turmoil. All these words describe the ANC's current policy stance on a number of matters, including the SA Reserve Bank.

A modern democracy rests on the division of powers between the legislative, the executive and the judiciary. This is the principle foundation of all modern, successful countries.

Under the leadership of its secretary general, Ace Magashule, the ANC clearly does not understand this basic principle. In Mr Magashule's mind, the ANC as the majority party clearly usurps the roles of the legislative and executive branches of government.

With this misconstrued role for the ANC in mind, Magashule pronounces on important policy matters such as the structure and the policy mandate of the SA Reserve Bank (SARB).

The SARB is one of very few institutions in the public domain that escaped state capture during the mad reign of the Zuma administration. In the mind of Magashule, this must have been an oversight that he wishes to change from Luthuli House.

There are two debates about the future of the SARB. One is about its ownership structure and the fact that it has private shareholders.

The SARB is one of only eight central banks with shareholders. Other central banks in a similar position are in Belgium, Greece, Italy, Japan, San Marino, Switzerland and Turkey. The shareholders have no influence over management or policy decisions in the SARB and receive a (taxable) dividend of 10c per share per annum. This dividend is prescribed by law. The nationalisation of the central bank will therefore really not make any policy difference.

With all the debate around possible nationalisation, it might be of historical value to reproduce a share certificate of the central bank (albeit in Afrikaans):

SARB

The real debate is about the policy mandate of the SARB. The mandate is prescribed in the Constitution as the protection of the value of the rand, in the interest of balanced and sustained economic growth in South Africa. We all want economic growth in order to eradicate South Africa's unemployment problem. However, these objectives cannot be achieved by changing the central bank's mandate.

The bank's mandate is embodied in an inflation target, implying that it uses monetary policy to keep inflation between 3% and 6% per annum. The central bank has been remarkably successful in discharging this policy objective, with average inflation around 5% per annum since adoption of the target.

Ramaphosa must stand up

Under the stewardship of Magashule the ANC as majority party wants to expand this mandate to include aspects such as economic growth and the eradication of unemployment.

Adoption of the approach advocated under the leadership of Magashule will take South Africa back to the bad old 1980s of the previous century. In the 1980s, the SARB was subservient to the governing National Party.

On occasion in the 1980s, the bank was even misused in an attempt to win an election for the National Party. Things really worked out very badly, with average inflation of nearly 15% per annum. At some point, inflation even exceeded 20% per annum for a short period of time.

Any initiative to take South Africa and the SARB back to this dark history should be opposed. In the long run, people get very poor under conditions of sustained inflation. For evidence in this regard, simply look at Zimbabwe: Inflation went to 4.8 billion per cent per annum and widespread poverty and hardship followed.

The independence from political interference was subsequently restored for the SARB and is now enshrined in the Constitution. Magashule's attempt is not the first to erode this positon, as the Public Protector, Advocate Busisiwe Mkhwebane, tried a similar approach. On that occasion, her report was overturned after a legislative process.

It is now time for Cyril Ramaphosa, the president of the Republic of South Africa, to stand up and give clear leadership. On this occasion, Ramaphosa cannot hide in his office or in a cavalcade of expensive black vehicles while chaos reigns. South Africa desperately calls for leadership by its real leader, not by the leader of the ANC in Luthuli House.

As a first step, Ramaphosa must consult on three executive appointments or reappointments at the SARB. The first matter is to fill the vacancy left by the resignation of Deputy Governor Francois Groepe. This position has been vacant and neglected since February 2019.

Position of governor

In addition, the term of office of Deputy Governor Daniel Mminele expires on June 30, 2019. This requires urgent attention.

Most pressing is the position of the governor. The appointment of Lesetja Kganyago expires in November 2019; only six months away. South African and international investors need certainty about the position of the governor of the SARB.

The reappointment of Kganyago and Mminele will appease investors and financial markets. This will maintain financial stability and reinforce certainty about South Africa's monetary policy focus. This will go a long way in supporting economic growth and the eradication of unemployment.

Ramaphosa must stand up and be the president of the republic. If he fails the country on this occasion, Magashule will soon be the de facto president of South Africa, ruling the country in a most undemocratic way from Luthuli House.

- Prof Jannie Rossouw is head of the School of Economic and Business Sciences at the University of the Witwatersrand.

** Want to respond to the columnist? Send your letter or article to voices@news24.com with your name, profile picture, contact details and location. We encourage a diversity of voices and views in our readers' submissions and reserve the right not to publish any and all submissions received.

Disclaimer: News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.

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

SHARE:

Inside News24

 
Traffic Alerts
There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.




Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.