President Cyril Ramaphosa on Thursday had to field several questions relating to the Reserve Bank’s independence and the impact of the government’s cost-containment measures on service delivery during his last question-and-answer session for the year in the National Assembly. These question-and-answer sessions are one tool MPs have to hold the executive arm of state to account.
The first question for the President on Thursday – a day after the Finance Minister delivered the Medium-Term Budget Policy Statement (MTBPS) – concerned the methods he considered appropriate to expand the Reserve Bank’s mandate to include economic development and job creation through managing interest rate hikes. Another part of the same question asked if the President has had engagements with stakeholders to discuss how the Reserve Bank should be made more accountable to Parliament.
In response, President Ramaphosa stressed that the Reserve Bank’s mandate is to protect the value of the currency. “South Africa faces a structural growth and unemployment problem that cannot be addressed by a mere monetary policy stance,” the President said. “We must focus on structural factors constraining our growth.”
He explained that high inflation stifles economic growth and erodes people’s purchasing power and living standards, especially those of the poor, because as inflation rises, the cost of living goes up pushing many purchases beyond the reach of many. The President also said that he sees no need to deviate from the government’s current inflation-targeting policy approach.
The President also stressed that the government has no intention of reviewing the mandate of the Reserve Bank, adding that in terms of the Constitution, the Bank must operate independently. However, in terms of the law, the Bank does publish monthly statements on assets and liabilities as well as its annual report and present those to Parliament. “The Bank is, therefore, accountable to Parliament,” he said.
In follow-up questions, the President was reminded of the Finance Minister’s statement on gross domestic product (GDP) growth and was asked if a more accommodating monetary stance is now necessary, given the poor economic growth prospects. President Ramaphosa acknowledged that growth levels have not lived up to the government’s expectations but he stressed that various reforms are underway to address this.
All these policy instruments should be used interactively, he told MPs, and monetary policy has a role to play. “As I said, section 224 of our Constitution sets our clear objects of the central bank and while it addresses the issue of the value of our currency, it has to be looked at in broader contexts.” South Africa must use all the fiscal and monetary macroeconomic policies at our disposal to foster growth, he continued. “The focus on the value of our currency should not be looked at in isolation but as part of a whole of all the instruments we have to foster growth. If we use this approach – a multidisciplinary one – we will be able to continue to ensure that growth is encouraged,” he said.
Referring to the cost-containment measures government has in place and their impact on service delivery, MPs also raised questions about the extent and impact of this fiscal discipline within government. The President referred to the MTBPS, which outlines South Africa’s fiscal position and the government’s spending priorities over the next three years. The Finance Minister made it clear that the government has resolved to “… stabilise public finances while maintaining support for the most vulnerable and protecting frontline services,” the President elaborated.
“At the same time,” he continued, “we are fast-tracking growth-enhancing reforms, which include a new financing mechanism for large, big-ticket infrastructure projects. Work is underway to reconfigure the structure and size of the state while strengthening its capacity to deliver quality basic services. The cost containment guidelines issued by the National Treasury give advice and guidance to government departments to ensure a sound and prudent management of public finances in the context of significant constraints.” He said the increase in fiscal strain is mainly due to reduced revenue and the cost-containment guidelines target non-critical spending items such as travel, catering, accommodation and capital items.
MPs also asked about the recently published Statistics South Africa census findings. According to the President, the census results are much more than just statistics and give the government a toolbox that show the areas where progress is needed.
The President also gave an update on the various commissions of inquiry currently underway, stating that the government has “learnt many lessons” and is making progress. He singled out the Nugent Commission of Inquiry into the South African Revenue Service and the Commission of Inquiry into allegations of impropriety at the Public Investment Corporation, which was headed by Judge Lex Mpati. “They’ve tabled their reports and those reports are being analysed, and proposals and recommendations are being turned into regulations or legislation. And this will be put forward to Parliament for legislation because they’ve come up with very important recommendations,” he told MPs.