Kganyago Hits Back at South Africa Central Bank Mandate Critics

(Bloomberg) -- Governor Lesetja Kganyago hit back at political parties that want the South African Reserve Bank’s mandate changed, saying that their call for economic growth to form part of its mandate is unnecessary because it already is.

In its manifesto released this past weekend ahead of a general election this year, the governing African National Congress said the central bank must consider the impact of monetary policy on economic growth when it targets inflation, re-emphasizing the flexible mandate the government gave the central bank almost a decade ago. President Cyril Ramaphosa moved to quell investor fears Jan. 16, saying the ANC won’t tamper with the central bank’s independence.

“Anyone who says that the SARB must focus on growth has clearly not read the constitution,” Kganyago told reporters Thursday in the capital, Pretoria, after the Monetary Policy Committee held the benchmark rate at 6.75 percent. “The constitution says what we do is in the interest of balanced and sustainable growth. You can’t have balanced and sustainable growth if you are running imbalances, and those imbalances include having high unemployment.”

Credit-ratings companies have singled out the central bank’s independence as a sign of institutional strength in the country, even as other government organs such as the revenue service and the prosecuting authority were hollowed out under the rule of former President Jacob Zuma. The central bank’s focus on price growth has drawn criticism in the past from parties who say it should also consider economic growth -- which hasn’t exceeded 2 percent annually since 2013 -- and job creation in its decision-making.

In 2017, Kganyago successfully fought off a proposal by the nation’s anti-graft ombudsman to change the constitution to remove the Reserve Bank’s inflation-target mandate.

Enoch Godongwana, the ANC’s head of economic transformation, said Saturday that the central bank’s independence is “sacrosanct,” a comment repeated by Ramaphosa and Finance Minister Tito Mboweni, which Kganyago said the central bank welcomed.

Godongwana and the ANC call for coordination between the monetary and fiscal authorities.

“Whosoever is calling for alignment of fiscal and monetary policy -- where have you been for the past 25 years,” Kganyago said. “Macroeconomic policy is fiscal and monetary,” he said, adding that the constitution requires frequent consultation between the central bank and the Finance Ministry.

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