Anthea Jeffery: The Reserve Bank and the National Democratic Revolutionary Alliance
The May 2019 election is fast approaching. All those who think a vote for Cyril Ramaphosa will help him succeed at constructive reform should remember that they will be voting, not for him – nor even for the ANC – but for the National Democratic Revolutionary Alliance.
The ANC’s manifesto for the coming general election, unveiled in Durban at the weekend, echoes the decisions taken at its 2012 Mangaung and 2017 Nasrec policy conferences in stressing that “South Africa requires a flexible monetary policy regime, aligned with the objectives of the second phase of the transition”. Yet the current independence of the South African Reserve Bank (SARB) – coupled with its constitutional obligation to “protect the value of the currency in the interest of ... sustainable economic growth, and its success in holding inflation within a 3%-6% band – is one of the few strengths the country has left in its attempts to attract foreign investment, either direct or indirect. Already, moreover, foreigners are busy exiting our bond and equity markets. In 2017, according to JSE figures, foreigners sold off R33-billion in equities, but bought R55-billion in bonds, making for an overall positive inflow of R22-billion. In 2018, however, foreigners sold off R55-billion in equities and R68-billion in bonds, making for a total outflow of R123-billion. The sell-off is likely to become even worse if the SARB has its mandate changed, as the manifesto seeks. The Democratic Alliance warned strongly against this. It also wrote to finance minister Tito Mboweni – who is authorised by the Constitution to have “regular consultation” with the SARB – asking for clarity on the implications of the manifesto. According to the SACP, however, the DA (“the bourgeois party”) wrote to the wrong person. It should instead have written to “the National Democratic Revolutionary Alliance”, to which Mboweni is expected to redirect the DA’s missive. This realignment of political power follows from a meeting last month where the ANC, Cosatu, the SACP, and the South African National Civic Organisation (Sanco) “reaffirmed the centrality of the Alliance in moving the National Democratic Revolution into a second more radical phase and collectively driving its successful execution”. So much for President Cyril Ramaphosa and his assumed capacity to push ahead with structural reforms once the ANC has won a big enough victory in the May 2019 election. People who vote for the ANC in the hope of strengthening “CR” and his mooted reforms – details of which remain remarkably sketchy – should know they will, in fact, be voting for the NDR Alliance. The Alliance is “supporting the ANC in the 2019 general election campaign” so that the ANC can thereafter push on with the “common Alliance platform”. What does that platform include? Expropriation without compensation (EWC), for one. At its December meeting in 2018, the NDR Alliance welcomed “the parliamentary breakthrough towards amending the Constitution” to provide for EWC. It also pledged to “continue mobilising the motive forces of the NDR to ensure the breakthrough is consolidated in 2019”. Why does the Alliance want EWC? Cosatu explained the real aim back in January 2018 when it said “we need state ownership of all the land in this country in order for the democratic state to break the power of... capital”. Macroeconomic policy is in the NDR’s cross-hairs, too. Hence, when Mboweni said recently that there was no need to change the SARB’s mandate, the SACP said he was “out of order”, and should have stayed true to the “genuine” and “national democratic revolutionary character” of the ANC. Adds the SACP (the capitals are theirs): “The mandate of the Reserve Bank was not designed ‘WITH THE OBJECTIVES OF THE SECOND [RADICAL] PHASE OF [OUR DEMOCRATIC] TRANSITION’ in mind.” This is why change is necessary and why the Alliance-endorsed manifesto made the commitment to change. The SACP goes on to claim that the change can be achieved via ordinary legislation under Section 225 of the Constitution, which it quotes as follows: “The powers and functions of the South African Reserve Bank are those customarily exercised and performed by central banks, WHICH POWERS AND FUNCTIONS MUST BE DETERMINED BY AN ACT OF PARLIAMENT....” The SACP’s emphasis in capitals is highly selective. It overlooks the first part of the clause – that the SARB’s powers and functions are “those customarily exercised and performed by central banks”. Such powers and functions are to guard against inflation in the interests of sustainable growth, not pursue failed socialist and communist ideologies. Parliament has no capacity to change the SARB’s powers and functions from those “customarily” performed by central banks without first changing the Constitution. Why does the NDR Alliance want the mandate of the SARB changed? Cosatu says it wants “very low-interest rates” to help “the poor and small businesses”. The Alliance may also want the massive printing of money to bail out failing SoEs and give BEE “industrialists” all the start-up and operating capital they want. However, there are major risks in “urging stimulus and going for growth”, as SARB governor Lesetja Kganyago warned in October 2018. People who want to “engineer a short-term boom” and ignore the long-term economic costs “don’t like it when the long-term shows up” – which is usually about two years after the implementation of their “quick-fix policies”. Moreover, those who think inflation doesn’t matter should “go try some”, adds Kganyago. They can also “ask all the Zimbabweans or Venezuelans who have had to leave their countries when their economies collapsed”. In addition, as Kganyago points out, South Africa’s “acute challenges” of joblessness, poverty and inequality are “not reasons to gamble with macroeconomic stability”. Rather, they mean that South Africa has to be “extra careful about managing the system carefully so it doesn’t blow up”. The May 2019 election is fast approaching. All those who think a vote for CR will help him succeed at constructive reform should remember that they will be voting, not for him – nor even for the ANC – but rather for the NDR Alliance. This Alliance has quietly taken control of policy and its implementation and is determined (as Cosatu put it some three years ago) “to deepen and advance the NDR as a direct route to socialism”. DM Dr Anthea Jeffery is Head of Policy Research at the Institute of Race Relations.