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South African Reserve Bank Must Pursue Flexible Policy, ANC Says

South African Reserve Bank Must Pursue Flexible Policy, ANC Says

  • Ruling party reiterates bank’s policy must consider growth
  • Central bank’s independence is ‘sacrosanct,’ Godongwana says

Cyril Ramaphosa speaks in Durban on Jan. 12. 

Photographer: Rajesh Jantilal/AFP via Getty Images

Photographer: Rajesh Jantilal/AFP via Getty Images

South Africa’s ruling African National Congress said the Reserve Bank must consider the impact of monetary policy on economic growth when it targets inflation, re-emphasizing the flexible mandate the government gave the central bank almost a decade ago.

“The ANC believes that the South African Reserve Bank must pursue a flexible monetary policy regime, aligned with the objectives of the second phase of transition,” the party said in its election manifesto which was unveiled on Saturday. “Without sacrificing stability, monetary policy must take into account other objectives, such as employment creation and economic growth.”

While South Africa’s economy emerged from a recession in the third quarter, growth remains sluggish, hampered by subdued business confidence, higher taxes imposed by government in February and a tight monetary policy stance. Gross domestic product hasn’t expanded at more than 2 percent annually since 2013.

Reserve bank Governor Lesetja Kganyago, who has been a strong voice for the bank’s independence, has in the past reiterated that any decisions taken by the monetary policy committee will be data-dependent and focus on the bank’s primary mandate of targeting inflation at three to six percent. While the central bank increased its key interest rate for the first time in more than two years in November, all 16 economists in a Bloomberg survey expect the repurchase rate to remain unchanged at 6.75 percent on January 17.

“The ANC is not proposing tweaking the mandate of the Reserve Bank,” Enoch Godongwana, the ANC’s head of economic transformation, said Saturday. “The independence of the Reserve Bank is sacrosanct. The intention is coordination between the monetary and fiscal authorities.”

The National Treasury, which slashed its growth forecast for 2018 by half to 0.7 percent in October, may take a prudent stance on tax hikes this year when is unveils its budget next month as the country prepares for elections expected to take place in May.