Public Protector Busisiwe Mkhwebane Picture: Bongani Shilubane
Cape Town - The South African Reserve Bank is sticking to its guns on its constitutional mandate to protect the value of the rand, shrugging off calls by Public Protector Busisiwe Mkhwebane that it should be changed through a constitutional amendment.

In its annual report on Monday, the Reserve Bank said its mandate to protect the currency and price stability was unchanged.

Mkhwebane has faced criticism for her stance, with some economists warning that changing the Reserve Bank’s mandate and eroding its independence would be disastrous.

Azar Jammine, the chief economist at Econometrix, said calls to change the mandate of the central bank were populist and would not solve the economic problems facing the country.

“When dealing with the economy, you can’t just look at the immediate impact of something but you have to look at the long-term implications - that is when you realise that it is not as simple as it seems,” he said.

Jammine believes that attention should be on addressing the structural factors that lead to slow economic growth. These are factors such as lack of education and skills, which are related to high unemployment. 

He said cutting interest rates may assist those who have over-borrowed and are in debt, but this was not a long-term solution as it would likely lead to higher inflation. That would affect the poor even more who, unlike the wealthy, cannot keep pace with inflation.

“The wealthiest section, who have their shares, pensions funds can actually keep pace with inflation. This is because share prices and property prices rise by as much, if not more, than inflation,” he said.

Because of sluggish economic growth over the past few years, there were now populist pressures to do something to improve the growth rate, Jammine said.

Iraj Abedian, of Pan-African Investment and Research Services, said calls for the Reserve Bank’s mandate to be changed smacked of political posturing.

“It is an ANC game, as opposed to being in the national interest,” he said.

He said it was puzzling why some individuals wanted to undermine institutions of governance.

“If you were a pessimist, you might say that they want to throw the country into chaos. I really do not know what they are trying to achieve. I have no more insight than you have,” said Abedian.

In his statement in the report, Reserve Bank Governor Lesetja Kganyago emphasised the key role and function of the bank.

“The Sarb’s primary mandate is to achieve and maintain price stability. This mandate is derived from the constitution of the Republic of South Africa. During the past financial year, monetary policy faced an increasingly difficult scenario of dealing with rising inflation in the context of slowing domestic economic growth,” said Kganyago.

He also expressed concern at the low growth prospects this year, which followed another low growth period last year, from the target of 1.5% to 0.3%.

He said the performance was disappointing.

“At 0.3%, this was the lowest annual growth rate since the recession following the global financial crisis (of 2009),” he said.

The Reserve Bank projected growth of 1% this year.

The bank came under pressure last week after Mkhwebane said its mandate must be changed so that its primary focus was promoting “balanced and sustainable economic growth while ensuring that the socio-economic well-being of the citizens is protected”.

However, she has met objections from the Reserve Bank, Absa and Parliament, which have all said they are taking her report to court.

Even the ANC stepped in and said Parliament was correct to take Mkhwebane to court because she had overstepped her mandate.

The ANC described her decision as constitutional overreach.

Parliament said it could not be directed by the public protector on how to conduct its business.

It derives its mandate from the constitution, and only Parliament can decide to amend the constitution and not the public protector.

Mkhwebane has defended her decision to call on MPs to amend the constitution.

An amendment would require a two-thirds majority in the House, and most of the parties in Parliament are opposed to Mkhwebane’s recommendation.

They have said they would not allow Mkhwebane to intrude on the constitutional functions of the national legislature.

Political Bureau