A tangled web, ANC edition: The Reserve Bank and ‘quantity easing’ mess reveals a party in deep internal crisis

On Wednesday morning, 5 June 2019, the divisions in the ANC on economic policy, and particularly on the mandate of the Reserve Bank, were back on display. This time they were more public than before, and thus more damaging to the economy and the currency.

The argument was sparked by the ANC’s secretary-general, Ace Magashule, saying that the National Executive Committee lekgotla had resolved to change the mandate of the Reserve Bank with regard to inflation targeting.

Almost all of this has happened before, and the ANC has a long history of public debates about this. But this time, it seems something may have shifted. However, in the longer run, the only way that the mandate can be changed is through the finance minister. And Twitter’s favourite chef is likely to remain unmoved in the face of calls for him to allow the mandate to be changed.

“On the South African Reserve Bank: Reaffirm the resolution of the 53rd National Conference Resolution on the mandate of the South African Reserve Bank which states: ‘South Africa requires a flexible monetary policy regime, aligned with the objectives of the second phase of transition. Without sacrificing price stability, monetary policy should also take account of other objectives such as employment creation and economic growth.’”

That is the resolution. Full stop.

Then there is the mandate of the Bank’s monetary policy committee as it is now.

Finance Minister Tito Mboweni helpfully tweeted out the current mandate as a reminder on Wednesday night:

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

It also begs the question: How much linguistic difference is there really between that ANC resolution and the current situation? Some could argue, not a lot.

Of course, all of this was sparked by the statement by Magashule on Tuesday afternoon, in which he said: “The ANC NEC lekgotla agreed to expand the mandate of the SA Reserve Bank beyond price stability to include growth and employment.”

And this pushed Godongwana into action in a role he has played many times before: His job over the last decade or so has been to hold the line, to ensure that there are no major changes to economic policy from the ANC. It has been a difficult job, all the way through from Julius Malema’s demand for the mines to be nationalised at the 2010 National General Council (NGC) through the land expropriation debate to this current fracas. In the end, he is usually the person who states publicly that things won’t change.

And so it is here.

In a more interesting vein, he continued: “I don’t recall any of the mandate being discussed. I would have drawn the attention of people to the fact such a decision can’t be taken… because the conference has closed this matter”.

For him, the matter is closed. What Magashule said happened did not happen. End of the debate? …

But of course, it doesn’t end there. It is obvious there is much more politics happening.

Perhaps the questions to ask are: What is the aim of those who want to change the mandate of the Bank? Why are they pushing this so hard, and what is the ultimate motivation for this?

While there are those, such as the SACP and Cosatu, that have consistently pushed for a change, other motives are now being ascribed to Magashule and his supporters.

Then there are those, such as Intellidex chairman Stuart Theobald, who believe this is about facilitating corruption.

The challenge to the SARB is about one thing only: removing it as an obstacle to corruption by gaining access to bank accounts and doing away with excon barriers to externalising looted money. SACP is being played for a fool. https://t.co/3haEfYcXzi

— Stuart Theobald (@rationalhill) June 5, 2019

This claim, when taken together with the various attacks on the Bank since it stepped into the VBS saga, may well grow in strength. Particularly when those implicated in the VBS saga (including the EFF) appear to be leading such a vociferous campaign against Public Enterprises Minister Pravin Gordhan (a campaign which may or may not include the Public Protector, depending on who’s making a determination).

What seems to be missing from all of this is what the debate around the mandate of the Bank should be about, which is obviously creating jobs and growing the economy. The Bank’s governor, Lesetja Kganyago, has said time after time that monetary policy cannot grow an economy, only economic reform can lead to the conditions in which jobs will be created.

And this appears to be missing from the ANC’s official pronouncements on the issue. It does not follow that cutting interest rates dramatically will lead to sustainable growth. Neither, for the record, will “quantity easing”. Instead, as other countries such as Zimbabwe and the Weimar Republic (Germany in the 1930s) have shown, cutting interest rates can simply lead to higher inflation which leads to people not being able to buy bread.

And this may well be where the crux of the issue lies. If this proposal to change the mandate of the Bank was presented as a part of a group of other proposals to radically reform the economy, those making the suggestion might win more legitimacy. Instead, the ANC appears to be saying that the government must cut unemployment from 27% to 14% (which is an oddly specific target in itself) without properly explaining how. And in the absence of that detailed and workable “how”, cynicism will intensify.

And this has always been the ANC’s problem. In large part, South Africa has such a high unemployment rate because the ANC has not been able to agree on what changes there should be to economic policy. And when changes have been agreed on, the contestation has not ended there. In 2012, the ANC’s Mangaung Conference accepted the National Development Plan by acclamation. Delegates didn’t vote, it was simply accepted. How much of that has been implemented?

Then there is the other signal that all of this sends, that the contestation in the ANC is not easing in any way, but in fact, is intensifying at an extreme rate.

Mabe said that it was agreed that “comrades should be engaged to desist from such conduct that would undermine the unity of the African National Congress”. And yet, within hours, Mboweni was contradicting Magashule on both Twitter and Facebook, while Godongwana was releasing his own statements directly to media organisations.

All of this is yet another expression of a comprehensively divided party.

More importantly, there are many people in the ANC who are happy to show contempt for the person of the secretary-general. This kind of conduct, this undermining of the office, would have been unthinkable during the time of Gwede Mantashe in that position.

Obviously, much of this has to do with the way that Magashule himself came to power and the sharp divisions at Nasrec that are potentially impossible to resolve. His critics would also say that he has behaved in a factional manner, and has never made an effort to unite the party in any way.

The point of this is that if the ANC is prepared to publicly contradict itself in this way on the economy, knowing the damage this must do to the currency and the economy itself, then is there anything left that is sacrosanct?

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