Makes no mention of a possible replacement for Reserve Bank deputy governor Kuben Naidoo.
President Cyril Ramaphosa said there should be no question about the Reserve Bank’s accountability given its regular financial reporting and annual appearances before parliament. Image: Daniel Leal-Olivas/WPA Pool/Getty Images
President Cyril Ramaphosa has shut down calls for an expansion of the South African Reserve Bank’s (Sarb) mandate, telling National Assembly members that the central bank is performing its key mandate successfully.
The president was answering questions before parliament on Thursday, where one of the talking points dealt with the mandate of the central bank as well as its accountability to parliament.
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“While the Reserve Bank should, without sacrificing price stability, take into account broader objectives such as employment creation and economic growth, there is, therefore, currently no intention to review the mandate of the South African Reserve Bank,” Ramaphosa told lawmakers.
“In terms of our constitution, the Sarb – in pursuit of its primary objective – must perform its functions independently without fear, favour or prejudice.
“But there must be regular consultation between the bank and the cabinet minister – in this case, the finance minister – responsible for national financial matters.”
Members of the ruling African National Congress (ANC) have previously expressed interest in expanding the Sarb’s mandate beyond inflation targeting to include supporting the economy and promoting employment.
The president further affirmed there is no question about the central bank’s accountability to parliament, adding this is evident in its regular financial reporting and annual appearances before parliament.
Members of parliament engaged Ramaphosa on several Sarb-related issues, including how the central bank’s finding on the Phala Phala farm scandal may have compromised the Sarb’s credibility as well as the effectiveness of its inflation targeting.
“I have seen no reason to believe that there is any need for deviation …,” Ramaphosa said, defending the Sarb’s mandate.
“Right now, many people are feeling the pinch, but I’m confident that [when] the inflation rate comes down in the rest of the world and our currency gets stronger, we should be able to see lower interest rates … therefore putting the efficacy of continuing to use this inflation rate targeting [beyond doubt]. So, until otherwise demonstrated, I think this continues to be a good policy approach,” he added.
Interest rates stress
The Sarb – which has moved to hike rates by a cumulative 475 basis points since November 2021 in its attempts to maintain inflation within the target range 0f 3-6% – has found itself on the wrong side of many South Africans who have had to negotiate their way through a suffocating cost of living crisis.
As it stands, interest rates sit at 8.25%, while headline inflation for September spiked back up to 5.4% after a short stint of easing in previous months. Wednesday’s Medium-Term Budget Policy Statement (MTBPS) has only soured whatever hopes some may have had for economic relief.
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Ramaphosa’s appearance before parliament comes just a day after Finance Minister Enoch Godongwana appeared before the same audience to table his third MTBPS.
Godongwana, in his statement, painted a bleak picture of the country’s economic health, telling South Africans that his office expects 2023 economic growth to come in at 0.8% while it will struggle to reach 2% in the next three years.
Adding to the gloom, Ramaphosa’s engagement with parliament stepped over the major question facing the central bank currently, which is who will replace deputy governor Kuben Naidoo, who tendered his resignation to the president earlier this month.
Naidoo’s resignation came just a month before the Sarb’s Monetary Policy Committee (MPC) meets to decide on the central bank’s last interest rate position for the year. Some analysts have predicted a further 25 basis point hike when the MPC meets on 23 November.
However, with up to seven members sitting on the MPC, Naidoo’s looming exit may make it trickier for the committee to reach its final interest rate decision of 2023.
When Reserve Bank Governor Lesetja Kganyago was asked for an update on Naidoo’s exit during an MTBPS media briefing on Wednesday, he redirected queries to the president’s office, jokingly noting that the process now sits above his pay grade.