By Rafiq Raji, PhD
Irregular; that was what I thought of finance minister Malusi Gigaba’s initial reactions in an interview with Reuters to Public Protector (PP) Busisiwe Mkhwebane’s mischievous proposals in June to change the mandate of the South African Reserve Bank (SARB): while defending the SARB’s independence, he was non-committal on whether the Treasury would join in a proposed legal action by the central bank against the PP. I was almost sure his difficulty in being his typical smooth self then was likely because he was privy to what is widely believed to be a grand scheme to make the SARB fall under the influence of his principal, Jacob Zuma, the South African president. My suspicion was confirmed not too long after when his deputy, Sfiso Buthelezi, unabashedly wondered, in a speech delivered in late June at the Gordon Institute of Business Science, a top South African business school, why the SARB should continue to have a 3-6 percent inflation target, set a long time ago when economic conditions were supposedly different. His arguments are nonsensical. Of course, the SARB did a robust rebuttal in its annual report released at about the same time, painstakingly explaining the economic rationale for its policies and how they help achieve precisely the goals its traducers were supposedly aiming for. Governor Lesetja Kganyago has gone even further: he wrote an editorial in a popular weekend newspaper recently, aptly titled: “Let’s base discussion of monetary policy on facts.” Mr Kganyago did not mince words: were the authorities to embark on an expansionary binge, the current recession might actually last for longer and even more painfully so.
Own the darn thing
At the recently concluded 6-day African National Congress (ANC) national policy conference, so-called “radical economic transformers” suggested it was time to nationalise the SARB. For sure, Mr Gigaba and his team at Treasury filed a suit in court challenging the PP’s proposals shortly after the news broke, joining an earlier one by the SARB. It made sense though, doesn’t it? Why bother about the mandate when you could simply own the darn bank. Naturally, a typically hyper South African press (and tireless Zuma critics) was hardpressed to argue against the logic around why the SARB should not continue to be in private hands. Of course, much of the suspicion around even such a common sense move revolves around the embattled Mr Zuma. Otherwise, and like I argued in an earlier column (“Who should decide a central bank’s mandate?”, 27 June 2017), it is an anomaly for the SARB to be privately owned. Most central banks are not. And those that still have private shareholders (like the US Fed) have such advanced and developed financial systems that it does not really matter in whose hands a central bank is in. More importantly, the Bank of England (BoE), which most central banks are modelled after, is publicly owned. And were one to rely on the BoE model even further, it might be pertinent to point out that until May 1997, the Chancellor of the Exchequer (finance minister) was the person who set interest rates, not the central bank governor. (Former prime minister Gordon Brown, who was chancellor at the time, has the unique distinction of transferring these powers to the BoE.) So on the face of it, the ANC is not doing anything untoward. But yes, those who worry that it might only be the beginning of likely increased meddling at the central bank (and other venerated institutions) are justified. To succumb to those fears would be short-sighted, however: Mr Zuma, his ilk and indeed his party would not be in power forever.
I’ve got the power
But Mr Zuma was not finished. He had other rabbits to pull from a hat. To ensure that Nkosazana Dlamini-Zuma, his ex-wife and frontrunner for the ANC presidency in elections scheduled for December, would have a place in government when he leaves office, he “accepted” the proposal of a dual deputy presidency by his home province, KwaZulu-Natal. How will it work? The candidate who loses the fight for the top job would automatically become a first deputy president, senior to the deputy presidential nominee of the successful presidential candidate, who then becomes a second deputy president. Some have interpreted this to mean Mr Zuma is not confident he has the delegates to guarantee victory for his favourite. During his remarks, the horror on the other leading contestant’s (Cyril Ramaphosa, the incumbent South African and ANC deputy president) face was a sight to behold. Of course, the proposals are simply just that: they would be debated at the branches and so on, before final adoption at the elective conference in December. It would probably be just a formality. A majority of the delegates and the bulk of the ANC system remains beholden to Mr Zuma, who though embattled, still retains tremendous powers to dish out patronage and harass erring cadres. That wasn’t all. Land expropriation without compensation was also proposed, with a caveat; only when it is “necessary and unavoidable”. The thorny issue of free higher education was also taken on: it would be free from next year, “subject to availability of funds”, of course. You guessed it. It was almost as if the ANC decided it would simply just do the key things in the ascendant ultra-leftist Economic Freedom Fighters (EFF) opposition party’s manifesto. Probably envisaging these, EFF leader, Julius Malema, has already begun to change tact, casting his net wider than Mr Zuma, who could be gone as early as December. Amidst all these are a very nervous investor community. My best advice to them would be to echo the words of former SARB governor Tito Mboweni two months ago: “It’s going to be dirty! The stakes are high, be careful.”
Also published in my BusinessDay Nigeria column (Tuesdays). See link viz. http://www.businessdayonline.com/won-anc-policy-conference/