Governor Lesetja Kganyago. Photo: Oupa Mokoena/ African News Agency (ANA)

JOHANNESBURG – The governor of the South African Reserve Bank (Sarb), Lesetja Kganyago, yesterday backed the Constitution to be the voice of reason in the debate for the central bank to have a dual mandate to focus on price stability, job creation and economic growth.

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This as the central bank's monetary policy committee (MPC) opted to keep the repo rate unchanged at 6.75 percent at its first meeting of the year.

Kganyago said it was a misnomer that growth and jobs were ignored in the current policy that has price stability as its primary focus.

“Our attitude is to protect the value of the currency in the interest of balanced and sustainable growth in the Republic. Whoever says Sarb must focus on growth has clearly not read the Constitution,” Kganyago said.

“You cannot have balanced and sustained growth if you're running imbalances, which include high unemployment. The reading of the Constitution explicitly said Sarb must protect the value of the currency to ensure price stability.”

Kganyago further warned that a change to the bank's mandate would require a change to the constitution.

The ANC, seeking a new mandate this year, said in its manifesto that Sarb should broaden its focus to boost employment and economic growth.

President Cyril Ramaphosa on Wednesday said he saw nothing wrong with the Sarb expanding its mandate.

“The governing party is essentially saying we have a burning platform with regard to employment, and we would like everyone to focus on job creation. Clearly, there is nothing wrong with that,” Ramaphosa has said.

North-West University Business School economist Professor Raymond Parsons welcomed comments on the role, status and autonomy of Sarb.

“It is essential that the constitutional mandate of the bank to provide price stability in the interests of balanced and sustainable growth be protected, even more so at a time when South Africa is anxious to boost investor confidence,” Parsons said.

The MPC also expressed its concern about weak fixed capital formation inhibiting future growth potential and hurting job creation.

Based on the Sarb’s quarterly projection model, inflation is forecast to average at 4.8 percent in 2019, 5.3 percent in 2020 and 4.8 percent in 2021.

Capital Economics economist John Ashbourne said: “We think that attention will soon turn to cuts; we expect a 25 basis point cut in 2020. Given policymakers’ change of heart, we now expect they will keep their key rate on hold for the duration of 2019.”

The rand weakened following the MPC decision being made public.

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