ANC MP calls for Reserve Bank’s mandate to be extended beyond inflation targeting

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One of the solutions to address high unemployment levels as well low economic growth is to expand the mandate of the South African Reserve Bank. This is the view of ANC MP and chairperson of the Standing Committee on Appropriations Sfiso Buthelezi. Buthelezi says the Reserve Bank’s primary mandate as outlined in the Constitution, of inflation targeting, contradicts government’s efforts to solve challenges of growing the economy.

South African consumers are financially stressed. They need relief from the ever-increasing food and fuel prices, repayment of bonds and costs of credit cards. From November 2021 to May this year, the repo rate increased by 475 basis points, leading to calls for the expansion of the mandate of the Reserve Bank.

“With interest rates that stifles and chokes investment and also chokes economic growth and employment opportunities, government expenditure again is choked. Remember that government runs a deficit, so it goes to the market to raise money so when the interest rate is high, government’s expenditure is bound to respond to that. We then arguing that to be preoccupied with inflation rate only it is problematic, it runs against what government is trying to do,” says Buthelezi.

However, some economists say changing the mandate of the Reserve Bank is cheap politics because if the country follows a relaxed monetary policy, inflation will become a huge problem leading to more unemployment.

“I think the Reserve Bank is doing exactly the right things. It is very painful to us, but we have to understand that the problem in SA is not the Reserve Bank. The problem is the government, the ANC government to be more specific which has created a very uncompetitive macro-economic environment and resulted in high levels of unemployment. This is politics ahead of elections next year,” says economist Dawie Roodt.

While others say government must rather overhaul the regulatory framework that seems to be stifling economic growth.

“It seems unconvincing at the moment given the inherent limitations of the tools in the toolbox of the Reserve Bank to deal decisively with issues such as unemployment and other economic considerations. What seems to be the priority now is for the government to implement policies that will allow the economic boost in order to deal with high unemployment and other factors such as inflation,” says political analyst Dr Nkosikhulule Nyembezi.

Despite that, Buthelezi maintains all the policies of the country should be looking at the pressing socio-economic challenges of unemployment and economic growth adding that some international Central Banks have included unemployment in their mandates.