The independence of the Reserve Bank was stressed on Thursday after a “routine meeting” between Finance Minister Tito Mboweni and Reserve Bank governor Lesetja Kganyago.
The national treasury and the Reserve Bank displayed a united front, issuing a joint statement about mutual respect, well-defined roles and working together to coordinate fiscal and monetary policy.
The statement described the bank as “an independent central bank”, and added that “National Treasury has always respected the bank’s independence”.
The statement followed weeks of speculation and confusing statements about the bank’s independence.
The first week of June saw the ANC’s factions laid bare again, as fighting started over what had been discussed at the ANC national executive committee’s lekgotla, especially over the mandate of the Reserve Bank.
The party’s secretary-general Ace Magashule said the ANC had decided that the Reserve Bank’s mandate should be expanded.
“It also directed the ANC government to consider constituting a task team to explore quantity easing measures to address intergovernmental debts to make funds available for developmental purposes,” Magashule said.
Magashule’s statements sent panic across the markets and international institutions, causing the rand to depreciate.
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Magashule’s statement from the lekgotla was disputed by Mboweni and ANC head of policy Enoch Godongwana, who accused Magashule of lying about the outcomes of the discussions.
The ANC’s top six finally sought to clarify and allay fears by issuing this statement: “It is our desire for the Reserve Bank to be publicly owned. However, we recognise that this will come at a cost, which, given our current economic and fiscal situation, is not prudent.”
Taking to his beloved Twitter page on Thursday evening, Mboweni said that he and Kganyago “stand firmly together in support of the banking and financial stability in South Africa”.
He referred to them as “anchors” and said it felt “good to be on the same page”.
The statement described the meeting as “routine” and added that the “effective coordination of fiscal and monetary policy is a central pillar of good macroeconomic management and policy certainty”.
It said that the roles and responsibilities of both the National Treasury and the Reserve Bank in the execution and communication of its functions and policies were “well defined”.
It clarified these roles.
“The National Treasury has always respected the independence of the Reserve Bank, and communicates when necessary on fiscal and economic policy. The Ministry of Finance would under normal certain circumstances not comment on the monetary policy stance or interfere in monetary policy decision making or decisions of the Reserve Bank. That is the role of the bank. The bank does not comment on fiscal policy and tax matters.”
The Reserve Bank, as “an independent central bank” takes “full responsibility for assessing the impact that its policies have on inflation and the economic prospects of the country”.
This ensures that “there is no confusion and any misleading signals about both our assessment of economic developments and the role our specific institutions play in macroeconomic coordination, which includes the exchange rate policy”, they said.
Mboweni also opened up about key appointments at the Reserve Bank.
Kganyago’s first term ends in November, and he had indicated that he would be available for another term.
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In consultation with the finance minister, the president of the country appoints the governor and three deputy governors for five-year terms.
President Cyril Ramaphosa is expected to make the three appointments later this year.
But Mboweni revealed that he and Kganyago had agreed to recommend two deputy governors to Ramaphosa:
“Most significantly, we agreed to recommend to the president two deputy governor candidates,” he tweeted, without revealing their names.
He did say that it was “great progress for our institution, the Reserve Bank. One female and one man. Gender and race balance.”