Umsebenzi Online - Volume 18, No. 02, 17 January 2019

Red Alert Why it’s imperative to align the SA Reserve Bank mandate with the objectives of the second radical phase of the national democratic revolution – Number 2

By Umsebenzi Online
On 15 January 2019 the Umsebenzi Online carried a Red Alert entitled “Why it’s imperative to align the SA Reserve Bank mandate with the objectives of the second radical phase of the national democratic revolution”. The intervention focused on the mandate of the South African Reserve Bank. The Red Alert cautioned against neoliberal and conservative class interests that are opposed to aligning the mandate of the Reserve Bank to South Africa’s national developmental imperatives such as employment creation and measures that would robustly give practical effect to the constitutional principles that require the Reserve Bank “to protect the value of the currency” not as an end in itself but, to directly quote the Constitution, “in the interest of balanced and sustainable economic growth in the Republic”.
The Red Alert emphasised the great importance of the constitutional principles – “balanced” and “sustainable” – in relation to and which should accordingly underpin our national approach to economic growth. Based on the persisting undesirable reality of high levels of class, race and gender inequalities, unemployment, poverty and uneven development comprising either undeveloped or systematically underdeveloped and historically disadvantaged areas on the one hand and both privileged and advantaged areas on the other, the Red Alert further underlined the historical fact that South Africa has never had the balanced and sustainable economic growth called for in our Constitution.

“It is therefore entirely legitimate and constitutional to rollback the grossly imbalanced and unsustainable growth reality into which we are seemingly locked”, thus asserted the Red Alert. The intervention attached great importance to the implementation of the ANC manifesto commitment for the forthcoming sixth democratic term of government, for a flexible monetary policy and accordingly for the Reserve Bank to take employment creation and the overall objectives of the second radical phase of our national democratic transition into account. Alliance partners the SACP, Cosatu and Sanco were involved in the extensive manifesto consultation and drafting process, and have accordingly endorsed the progressive thrust of the manifesto.

It was expected, following the public launch of the manifesto and the release of the Red Alert, that sections and agents representing neoliberal and conservative private wealth accumulation interests based on working class exploitation, the results of which are the persisting high levels of economic inequalities, mass poverty and unemployment, will rave in reaction. The Business Day did exactly that, using an editorial conflating the mandate of the Reserve Bank with other issues and blurring the lines between everything in the concoction. Just to underline the extent of the unemployment problem, according to Statistics South Africa’s “Quarterly Labour Force Survey” report released on 30 October 2018, 9.8 million South Africans are unemployed in terms of the holistic definition of unemployment which takes discouraged work seekers into account. By the way unemployment, just as it is the case with class inequalities and poverty under capitalist production, is not only a result of labour exploitation by capital but also a condition and lever for private wealth accumulation.

Proceeding from the above, let us now look at the independence of the Reserve Bank.

The Red Alert clearly defended the independence of the Reserve Bank from the standpoint of our Constitution, which categorically states that: “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 and must be exercised or performed subject to the conditions prescribed in terms of that Act”. There are several operating principles that merit highlighting from this constitutional provision.

Take note of all the “must” in the provision. Firstly, they refer to the mandatory obligation of prescribing the powers and functions, that is, the mandate, of the Reserve Bank through an Act of Parliament. Secondly, they refer to the mandatory obligation of setting the conditions, through that Act, in terms of which those powers and functions must be “exercised” or “performed” by the Reserve Bank.

The words “exercised” and “performed” both referring to what the Reserve Bank must do are constitutionally prescribed operating principles in the provision. They correctly refer to the operational independence of the Reserve Bank, whereas the power and/or function, in one word the mandate, of prescribing the powers and functions of the Reserve Bank and setting the conditions under which it must exercise those powers and functions is strictly reserved for a democratically elected Parliament. The SACP correctly upholds this constitutional determination regarding the independence of the Reserve Bank.

The provision guides how the ANC-headed Alliance endorsed progressive manifesto thrust concerning the mandate of the Reserve Bank should and must be implemented. In addition, and as the Constitution further prescribes, the Reserve Bank must exercise its powers and functions not in isolation but in consultation with the Minister of Finance. The Minister of Finance to be appointed under the ANC-led government following the sixth democratic general election will have the duty to ensure that the manifesto is implemented.

Tito Mboweni, current Minister of Finance and former Reserve Bank governor, argued in reaction that as far as he was concerned the Reserve Bank has always taken into account the principles entailed in the ANC manifesto commitment on the mandate of the Reserve Bank. While this is obviously debatable, it nevertheless points to the fact that there should be no dispute whatsoever on constitutionally making explicit, through strengthening the Act of Parliament referred to above, what the Reserve Bank has always taken into account. Mboweni argued against the politicisation of the Reserve Bank when in fact the ANC, the SACP and Cosatu have not argued for such. Nonetheless whatever that meant, the real and dangerous politicisation of the Reserve Bank lies in arguing against transparency – that is, in arguing against making legislatively explicit what the Reserve Bank has hitherto taken into account and robustly ensuring transparent accountability.

Umsebenzi Online is an online voice of the South African working class