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Lesetja Kganyago standing on shoulders of apartheid giants - COSATU

Federation says SARB's policy of low inflation has entrenched separate development and income and asset inequalities

Mr Lesetja Kganyago is standing on the shoulders of apartheid giants like Dr Chris Stals

The statement by the Governor of the Reserve Bank, Mr Lesetja Kganyago that no one can change the independence of the South African reserve Bank and that they stand on the shoulders of the giants is evidence of what is wrong with the Reserve Bank. This level of condescension and obsolete bravado represents the most blatant disrespect fordemocratic institutions, which is not surprising from the unelected and undemocratic markets and their agents.

The only giants that Mr Kganyago and his friends are standing on top of are people like Dr Chris Stals and other apartheid “giants” , who ensured that the post 1994 dispensation was going to be about preserving the inherited privileges and ill-gotten gains of apartheid beneficiaries.

The source of the SARB’s power to pursue inflation is section 224 (1) of the Constitution which states that the primary object (or the mandate) of the South African Reserve Bank is to protect the value of the currency in the interest of balanced and sustainable economic growth in the Republic. (2) The South African Reserve Bank, in pursuit of its primary object, must perform its functions independently and without fear, favour or prejudice.

But it will be good to remember that prior to the adoption of the Constitution various apartheid commentators and intellectuals, including Dr Chris Stals the former Apartheid governor of the Reserve Bank, who served as a governor between 1989 and 1999 argued that the interest rate policy cannot be used on a discriminatory basis. For instance it should not favour certain groups in the society such as black farmers, black industrialists and black workers.

And that any intervention in the market should be through inflation targeting using interest rates to control inflation and not through administrative controls e.g. price and rent controls. It was argued that in order to ensure the independence of the Reserve Bank it should be protected by the Constitution a wish or demand, which was fulfilled through section 224(2).

The current policy of low inflation has entrenched apartheid economic policy of separate development, income and asset inequalities. An ordinary person without a job would prefer a job over inflation. Better some job whose pay has declined in real terms by a few percent than no job. Low inflation has resulted in financial instability recession, layoffs and no job security.

We need a central bank that will pursue an inclusive monetary policy and that will regulate the finance sector with a view to ensuring that there is redistribution of income and wealth to all South Africans as mandated by the freedom charter. Focusing only on inflation is wrong when a large part of the cause of inflation is imported in the form oil prices and food prices and when the only beneficiaries of this policy are bond holders.

The much talked about independence of the Reserve Bank is a myth that the defenders of the status quo like to encourage. The bank is currently only notionally independent as it generally subscribes to the dominant and conventional but failing policies received from finance capital – even at the expense of real producers of wealth in mining and manufacturing.

COSATU will continue to fight for a fully publicly owned reserve bank that will account to the public through their representatives in Parliament on the implementation of this broad mandate we are calling for. This also means that the appointments to the bank must also be subject to the same parliamentary processes. . The Reserve Bank should be taken from the banks and restored to the people to whom it belongs.

Statement issued by COSATU, 21 July 2017

Earlier statement:

COSATU statement on the Reserve Bank Monetary Committee’s decision to cut interest rates

The Congress of South African Trade Unions has noted and welcomes the South African Reserve Bank Monetary Committee’s decision to cut the repo rate by 25 basis points from 7% to 6.75% .While this is still very little it is better than nothing and will hopefully offer some relief to consumers and those who are paying for their houses.

The federation will recognize anything that will act to reduce the price of credit in economy; however, we need to point out that this will not be sufficient to assist an economy that is in a recession. In the first quarter of 2017 we have lost 48000 jobs to add to the already more than 9.3 million people who are already without jobs.

COSATU continues to argue that the narrow focus on inflation targeting is not an appropriate monetary policy approach for an economy that requires significant state intervention to kick-start the economy out of recession, deal with the crisis of unemployment and deepening poverty.

We are unyielding in our demand that the reserve should take a more interventionist stance by directing banks to finance the manufacturing sector and for SA to reduce its import bill specifically of consumer goods

Since the June 2007 ANC Policy Conference, there have been calls from the ANC for macro-economic policies that support and sustain growth, job creation and poverty eradication over the long term. We remain adamant that policies should be judged by how far they help to create and preserve jobs and to reduce poverty.

Our monetary policy approach must take into consideration our primary economic challenges of radically reducing unemployment and poverty!

We acknowledge that price stability is important but as workers, we favour an approach that incorporates both the developmental imperatives and also protects the currency. These are mutually reinforcing rather than contradictory.

Statement issued by COSATU, 20 July 2017