Ramaphosa: Hands off the Reserve Bank – for now
President Cyril Ramaphosa says that there are “currently” no plans to change the South African Reserve Bank’s (SARB’s) mandate to go beyond what is prescribed by the Constitution.
This stance stands in opposition to many in the political sphere – including from within Ramaphosa’s own party, the ANC – who believe that the Reserve Bank’s mandate should be changed to better match South Africa’s developmental goals.
Responding to questions in Parliament this week, the president said that the Reserve Bank’s mandate is set out in section 224 of the Constitution, and it is successfully pursuing it.
As it currently stands, the primary object of the South African Reserve Bank is to protect the value of the currency in the interest of balanced and sustainable economic growth in the Republic. In doing so, the bank must perform its functions independently and without fear, favour or prejudice.
However, it must engage in regular consultation with the cabinet minister responsible for national financial matters – which it does, the president said.
Proponents of a mandate change want to alter the wording in the Constitution to make it such that the SARB should commit to job creation and economic growth as part of its mandate.
However, critics of the move – including the Reserve Bank itself – have argued that these targets are a function of government, not the SARB. The Reserve Bank can only change monetary policy, not create jobs.
Ramaphosa seems to agree.
“South Africa faces a structural growth and unemployment problem, which cannot simply be addressed by a more accommodative monetary policy stance,” he said.
“We need instead to focus on the structural factors constraining our economy. That is why, as part of our efforts to accelerate growth and employment creation, we are committed to macroeconomic stability, the rapid implementation of structural reforms and a capable state that provides the necessary public goods and services.”
The president said that the Reserve Bank’s mandate – price stability – already supports economic growth as low and stable inflation creates certainty about future prices, which helps facilitate investment and consumption decision-making by firms and households.
“Low and stable inflation also makes South Africa’s exports competitive relative to trade partners. By contrast, higher inflation harms economic growth and stifles employment creation. Higher inflation erodes the purchasing power and living standards of everyone, especially the poor,” he said.
“As inflation rises, the cost of living goes up. Most items cost more and people are not able to afford many of the items they usually buy.”
While the Reserve Bank should, without sacrificing price stability, take account of broader objectives such as employment creation and economic growth, there is no plan to make this its mandate, the president said.
“There is therefore, currently, no intention to review the mandate of the South African Reserve Bank.”
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