South Africa’s ANC Commits to Reserve Bank Mandate, Independence

Rene Vollgraaff

(Bloomberg) -- South Africa’s ruling African National Congress reaffirmed the central bank’s role, mandate and independence in an annual policy statement.

The assurance may allay fears of renewed attacks by some ANC leaders on the South African Reserve Bank in the run-up to the party’s national general council later this year. The gathering will mark the mid-point of the current ANC leadership’s term, when President Cyril Ramaphosa will face pressure to show he has made progress on some of the party’s more populist resolutions adopted in December 2017, including nationalizing the bank.

The central bank last year came under criticism from labor unions and some senior ANC members who want interest rates to be reduced. They argue that the bank’s drive for low inflation is misplaced and that it should do more to boost growth in an economy that contracted in the first and third quarters of 2019 and in which almost 30% of job seekers are unemployed.

ANC Secretary-General Ace Magashule caused shock waves in financial markets last year when he said the central bank’s mandate should be changed to ensure it does more to foster economic growth and create jobs. Ramaphosa quickly moved to repudiate those comments. In 2017, the nation’s anti-graft ombudsman tried to remove references in the constitution to the Reserve Bank’s inflation mandate, but that was struck down by a court ruling.

The Monetary Policy Committee targets inflation in a band of 3% to 6% and it has made it very clear it prefers the rate close to 4.5%. Of the 15 economists surveyed by Bloomberg, 12 forecast the panel will keep its key rate unchanged at the next MPC meeting on Jan. 16, even with price growth at a nine-year low.

The party decided at the 2017 conference that the central bank, one of a handful worldwide owned by private investors, should be nationalized. While the current shareholders have no say over policy, some proponents of the ownership change argue it’s an important part of adjusting how the institution works.

The move toward public ownership of the central bank must be done “in a manner and according to a timeframe that is prudent and affordable and that does not benefit private shareholder speculators,” the ANC said on Saturday.

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