South African President Cyril Ramaphosa played down suggestions that an amendment to the central bank’s mandate is imminent, while confirming that a possible change remains under discussion.
Any change to the mandate of the South African Reserve Bank, which focuses on curbing inflation, will take time, Ramaphosa, told reporters in Johannesburg on Monday. Last week Gwede Mantashe, the chairman of the ruling African National Congress, said the party had agreed at its national conference to change the mandate, prompting a decline in the value of the rand.
“It requires a constitutional amendment, it’s not just a matter you embark on,” Ramaphosa said. “It’s not something that’s about to happen, it’s something that’s being debated.”
South Africa’s economy is being held back by regular power cuts and the nation has one of the world’s highest unemployment rates. The Reserve Bank has repeatedly said bolstering economic growth and job creation fall outside the scope of monetary policy.
The ANC’s previous attempts to make ownership changes at the bank have stalled and it won’t be able to effect a constitutional change to its mandate on its own because it doesn’t have the requisite two-thirds majority in parliament.
Mantashe said the mandate needed to be expanded to “meet the needs of the economy,” while Mmamoloko Kubayi, the head of the ANC’s economic transformation committee, said various options needed to be explored to ensure the bank does more to encourage job creation. One of those was a constitutional amendment, she said, while stressing that the party is committed to protecting the bank’s independence.
The US and Australian central bank mandates among others include promoting employment, Ramaphosa said.
He also indicated a resolution the ANC adopted in 2017 for the government take ownership of the Reserve Bank, one of the few privately owned central banks in the world, is unlikely to be implemented because the government can’t afford it, and in any event that money would be better spent on economic development.
The central bank is seen by investors, business and ratings companies as one of few pillars of institutional strength in an economy hollowed out by state graft during former President Jacob Zuma’s rule. A 2017 proposal by now-suspended graft ombudsman Busisiwe Mkhwebane to change the bank’s constitutional mandate and curtail its independence sparked concern before it was blocked by the courts.
A change to the mandate, given the likely reaction in the markets, may not be pursued, Eurasia Group said in a note to clients.
“Neither Ramaphosa nor his allies are likely to expend political capital on a policy that is unpopular in the domestic business community and among foreign investors,” the political risk consultancy said.