Finance minister Tito Mboweni backed the central bank’s existing mandate of targeting inflation only hours after the ruling party’s top decision-making body called on the government to expand the remit to include economic growth and job creation.
Enoch Godongwana, the head of economic transformation at the African National Congress, has also come to the Reserve Bank’s defence. This follows comments from Ace Magashule, the party’s secretary-general, on Tuesday that the ANC’s National Executive Committee agreed to broaden the Reserve Bank’s objectives beyond price stability and that it look at quantitative easing .
“Government sets the mandate” for the South Africa’s central bank, Mboweni wrote on Twitter late on Tuesday. “The primary mandate of the South African Reserve Bank is to protect the value of the currency in the interest of balanced economic growth and development.”
Government sets the mandate for the SARB. There is no quantitative easing thing here. The primary mandate of the SA Reserve Bank is to “protect the value of the currency in the interest of balanced economic growth and development”.
— Tito Mboweni (@tito_mboweni) June 4, 2019
Magashule’s comments risk “undermining policy certainty,” Godongwana said in an interview on Johannesburg-based radio station SAfm on Wednesday. Godongwana was earlier cited by the Johannesburg-based TimesLIVE website as saying the NEC has not taken a decision to expand the Sarb’s mandate. Both Mboweni and Godongwana are members of the NEC.
The confusion highlights the divisions within the ANC and further complicates President Cyril Ramaphosa’s plan to turn around South Africa’s struggling economy, which contracted by 3.2% in the first quarter, its worst performance in a decade. While the independence of the Reserve Bank is enshrined in South Africa’s constitution, the central bank is increasingly being targeted by factions within the ANC, who want it to take a more active role in providing economic impetus.
The NEC also directed the ANC government to consider “constituting a task team to explore quantity easing measures to address intergovernmental debts to make funds available for developmental purposes.” Magashule told reporters.
Mboweni dismissed Magashule’s comments, saying “there is no quantitative easing thing here.” Quantitative easing usually refers to a relaxation of monetary policy achieved through the purchase of longer-term securities by the central bank.
As it stands, the monetary policy committee of the South African central bank targets keeping consumer inflation at between 3% and 6%. Calls to ANC spokesman Pule Mabe weren’t answered.
© 2019 Bloomberg L.P