S. African president reassures jittery investors about central bank independence

Source: Xinhua| 2019-06-07 02:59:50|Editor: yan
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CAPE TOWN, June 6 (Xinhua) -- Amid growing market jitters over policy uncertainty over the mandate of the South African central bank, President Cyril Ramaphosa assured on Thursday that his government will maintain the independence of the bank.

As set out by the Constitution, the role of the bank, known as the South African Reserve Bank (SARB), is to protect the value of the currency in the interest of balanced and sustainable economic growth, Ramaphosa said in a statement issued by the ruling African National Congress (ANC).

Ramaphosa was speaking after ANC top officials gave conflicting remarks on the mandate of the SARB.

On Tuesday, ANC Secretary General Ace Magashule said the ANC's national executive committee (NEC) had agreed at its meeting over the weekend to expand the mandate of the SARB to allow it to focus on economic growth and employment instead of only targeting inflation.

But Magashule's remarks were refuted by ANC's economic transformation head, Enoch Godongwana, who said the ruling party had not taken a decision to expand the mandate of the SARB.

Godongwana said Magashule's comments risk "undermining policy certainty."

Finance Minister Tito Mboweni and SARB Governor Lesetja Kganyago also came out in defence of the SARB's current mandate, saying any attempt to change its mandate would destabilize the market.

The SARB's primary mandate "is to protect the value of the currency in the interest of balanced economic growth and development," Mboweni said.

The ANC's policy confusion over the SARB has sent the local currency of rand plummeting by more than 2 percent against the U.S. dollar since Tuesday.

The confusion highlights the divisions within the ANC and further complicates Ramaphosa's plan to turn around South Africa's struggling economy, which contracted by 3.2 percent in the first quarter, its worst performance in a decade.

Referring to the confusion, Ramaphosa said the current spat among top ANC officials "is not helpful."

The government's policy towards the SARB "has not changed," he stressed.

Unlike most central banks in the world, the SARB has been privately owned since it was established in 1921, but its shareholders have no control over monetary policy, financial stability policy or banking regulations.

Although the independence of the SARB is enshrined in South Africa's Constitution, the bank has been criticized for failing to help boost the economy and create jobs.

There had been attempts by the ANC to nationalize the SARB so as to enable it to play a more active role in providing economic impetus.

In 2018, the ANC, which would like to see the government owning 100 percent of the bank's shares instead of the current arrangement where the shares were held by a number of private shareholders, tabled a motion in Parliament to nationalize the central bank but later withdrew the motion due to strong opposition.

The SARB insists that changing the ownership structure of the bank would raise the level of risk and uncertainty for the country in both the financial and economic policy sense.

On Thursday, Ramaphosa said: "It is our desire for the South African Reserve Bank to be publicly owned. However, we recognize that this will come at a cost, which, given our current economic and fiscal situation, is simply not prudent."

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