By Redge Nkosi
Dr Hlengani Mathebula authored “Why we must protect SARB”, and this appeared in City Press of October 16. Quoting Ernst Hemingway, 1935, he attributes South Africa’s stagnant economy to mismanagement and corruption, both of which do not apply to the SA Reserve Bank (SARB), which we must protect.
In other words, he sees no contribution of the SARB to stagnating of the economy for the past decade and half or so. It is hard to imagine any person with even the simplest understanding of economics absolving the SARB from the economic mess South Africa finds itself in. Recently, even the avowedly right-wing Neo-liberal supporters of the Bank have condemned its misguided stance as harming the economy.
He goes on to write that “that’s why there have been calls by some within the governing party to mess with the mandate of the SARB, the institution that is charged by the Constitution to keep the inflation in check".
According to his logic, a constitutional mandate cannot be changed, or if it can, changing the mandate of the SARB is to mess up with the SARB, part of the corruption and mismanagement that is stagnating growth.
Without even having to name the many countries that have more than price stability as their central banks mandate, we have seen many others adding new mandates, including “unemployment" as one of them. And these are advanced countries that have little to worry about their levels of unemployment. And we are told that changing SARB’s mandate to include unemployment is to mess the Bank and, by extension, the country.
The author adds yet another puzzle to his logic: adding (un)employment to the mandate of the SARB is a proposal that goes against all available evidence on the causes of the country's high unemployment". Whatever this phrase means, the author offers not a single example of evidence to support his wild claims.
Continuing with his logic, the author plucks the cost of nationalising SARB as in billions of rands, a number branded around by opportunists whose primary intent is to see the reserve bank pumping rands into their unnecessary shareholdings of the Bank. He follows this with another statement about the nationalisation move as causing “uncertainty" among investors. The usual tired fear-mongering tricks used by those who have nothing else logical to offer about how to get this country out of its current mess.
The investors they often refer to are the speculators in bonds, currency and related footloose capital holders (yield-hunting hot money). Yet, the very “investors” have their own reserve banks nationalised.
On high inflation, the author goes on a tour of Germany's hyperinflation, Zimbabwe and Brazil, and cautions about such hyper-inflations due to those central banks not being independent. Therefore, we should protect the SARB. What he forgets is that Germany's central bank was very independent, but hyperinflation visited it. So he equates hyperinflation with the non-independence of central banks.
Had he remembered that the most successful reserve bank, that of China, is not independent, yet its inflation hovers around 2% and 3%, he would have toned down his rhetoric that such a bank can’t fight inflation because of political pressure. To suggest those that are not independent cannot fight inflation better sounds rather a mirage if we look at the evidence.
Had he listened to Professor Joseph Stiglitz’s speech at the Indian Reserve Bank recently, where he remarked that less independent central banks had done better than all these so called independent ones. Independent ones are captured by sectional interests (not national interests), Stiglitz argued. Could this have dampened the author's spirits?
Redge Nkosi is an executive director at· Firstsource Money.
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