Ace, Enoch & Tito, and the role of the South African Reserve Bank

By Alastair Reed and Paul Vecchiatto

(Bloomberg) – South African 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, also came to the Reserve Bank’s defense. This follows comments from Ace Magashule, the party’s secretary-general, on Tuesday that the ANC’s National Executive Committee had agreed to broaden the Reserve Bank’s objectives beyond price stability and that it look at quantitative easing to fund development.

“Government sets the mandate” for 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.”

Godongwana said he was “shocked” when he heard Magashule’s statement, and that the issues hadn’t even been discussed by the NEC, the party’s top management structure.

“All I can say is that there will be no changing of the South African Reserve Bank mandate,” Godongwana said by phone from Johannesburg.

Mboweni and Godongwana are members of the NEC.

Economic contraction

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 the 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 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 central bank targets keeping consumer inflation at between 3% and 6%. Calls to ANC spokesman Pule Mabe weren’t answered.