Ramaphosa's final word on the Reserve Bank's mandate
More reach over transformation or to stick to its constitutional mandate? President Cyril Ramaphosa makes the Reserve Bank's requirements clear.
In his State of the Nation Address on Thursday evening in Parliament, the president said the Sarb should pursue its mandate “independently, without fear, favour or prejudice”.
He said the central bank was a critical institution of South Africa’s democracy, and enjoyed wide credibility and standing within the country and internationally.
“Rising prices of goods and services erode the purchasing power of all South Africans, but especially that of the poor. Inflation further undermines the competitiveness of our exports and our import-competing firms, putting industries and jobs at risk.
“For these reasons, our Constitution mandates the South African Reserve Bank to protect the value of our currency in the interest of balanced and sustainable growth,” Ramaphosa said.
This followed a statement earlier this month by the African National Congress’ (ANC) secretary-general Ace Magashule that the governing party’s national executive committee Lekgotla (NEC) had agreed that the bank’s mandate should be expanded beyond price stability, which adversely affected the rand and the local markets.
Magashule said the ANC NEC Lekgotla agreed that the Sarb should focus on economic transformation and job creation, adding that the NEC directed government to also explore quantity easing measures to address intergovernmental debts.
However, the president issued a statement later saying the debate over the mandate of the Sarb wasn’t helpful and the mandate of the bank had not changed.
In his Sona, Ramaphosa said the Constitution required that there should be regular consultation between the Sarb and the minister of finance to promote macroeconomic coordination, all in the interests of employment creation and economic growth.
However, the president also said price stability was necessary but not a sufficient condition for economic growth.