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The Congress of South African Trade Unions has noted the statements by Reserve Bank Governor Lesetja Kganyago questioning the wisdom of expanding the mandate of the bank to include employment creation rather than just focusing on inflation targeting. The Governor also questioned the wisdom of South Africa having a state bank.

This is discouraging and disappointing because it proves that our policymakers and decisionmakers are abnormally unreflective and they are not alarmed by the current economic situation. The governor fails to appreciate that it is possible to have a monetary policy that incorporates both the developmental imperatives, while also protecting the currency and that these are mutually reinforcing rather than contradictory.

Monetary policy the domain of the Reserve Bank has a profound impact on the South African economic environment and the ability of the country to meet its development goals. Monetary policy influences the conditions under which the private financial sector can create credit, it determines the growth rate of the money supply and the level of interest rate.

This interest rate, perhaps the most influential price in the economy, then impacts on core areas of economic activity -aggregate demand, investment, inflation, thus workers purchasing power, and the sustainability of the public sector. Determination of monetary policy is therefore not a purely technical question but has profound implications for all aspects of economic life.

The bank decides the amount of money that is lent out, to whom and for what purpose. It, therefore, holds the power to reshape the economic landscape that affects us all. We expect the reserve bank to ensure banks lend for productive purposes that creates jobs or boosts GDP, instead of consumption or for assets, causing asset price inflation.

The bank can impose quantitative controls on commercial banks to ensure that a portion of their loans go to priority sectors that drive economic growth and create jobs on a larger scale.

Politically, this is a debate that the upcoming ANC National Conference needs to grapple with in December. The last ANC Policy Conference noted the historical anomaly of private ownership of the SARB and reaffirmed the 54th National Conference resolution that the bank should be owned by the state. Government was urged to find mechanisms to restructure the ownership of the SARB, in a manner which safeguards and further entrenches the SARB’s constitutionally enshrined independence. Fully cognisant of the likely cost implications for the fiscus, which faces many competing expenditure priorities, government was urged to find ways to minimize any liabilities to the state flowing from this process.

The ANC called on the SARB to implement monetary policy in a balanced manner. It argued that just as monetary policy must target inflation to contain the rising cost of living, the monetary policy framework should also consider growth, employment, and exchange rate factors.

It is through correct monetary and fiscal policy management that interest rates – including long-term borrowing rates and risk spreads – can best be contained to create an environment conducive to higher levels of investment, growth, and employment creation.

The Governor has also questioned the need for a State Bank. He is ignoring the fact that most South African citizens are dependent on the survivalist economy that has been ignored by the banking sector in this country. This country’s big private banks are not held accountable on how they conduct their businesses; they make decisions that are not developmental, and they abuse their dominance.

Large banks want to deal with large customers so that they can make large deals and they also want short-term profits. They end up trapping many poor people in debt through their consumption lending patterns and higher interest rates and fees.

A state bank will offer a transparent alternative to private banks like ABSA and Standard Bank who have been involved in currency manipulation and other despicable activities. Another benefit of a state bank is that it will offer competition to the existing banking system and could be a way to help expose customer abuses and the gouging that is prevalent in these big private banks.

The bank will also not only protect consumers but will also implement sound fiscal policy. It will offer lower debt costs to municipalities and provinces, fund public infrastructure projects, and encourage entrepreneurship by providing loans to small businesses at lower interest rates and with lower fees.

For a country that has now realised that it cannot postpone land reform and economic transformation; a state bank is no longer a luxury but a necessity. Small farmers will be protected from exorbitantly high interest rates that put their farms at financial risk because the bank will offer farmers more equitable access to capital.

A country like Germany has managed to recover from the devastation of the Second World War by ensuring that about 70% of bank deposits are held by 1500 regional and local-not-for-profit banks. These banks focus on productive lending for productive purposes, helping small businesses to expand and grow jobs.  We also expect a South African state bank to partner with private community banks and cooperative banks to invest in community development projects.

Corruption has been used as an excuse to dismiss the idea of state bank but in 2017, a total of 17 banks were allegedly involved in price-fixing and market allocation in the trading of foreign currency pairs involving the rand, according to the Competition Commission.

We did not hear people calling for these banks to be shut down and their banking licences revoked. We need to fight corruption in both the public and private sector, but it should not be used to demonise the role of the state in the economy. 

Politically, the ANC delegates reaffirmed previous resolutions on the fundamental imperative and urgency of the establishment of a State Bank; and in light of the feasibility study already done in this regard, government was urged to move with speed in implementing this resolution by finding a way of capitalise the state bank.  

Based on the flippant and contemptuous statements made by the Reserve Bank Governor, our best chance is to remove the arch- neoliberal government appointed directors in the board of the SARB, and remove the executive directors, too.

South Africa needs to put people, in these positions, who can maintain inflation-targeting, protect the value of the rand, the living standards and the value of investment capital, whilst still being able to prioritise employment. We need imaginative personnel with capacity and credibility if we are to have a people-centred monetary policy that responds to our current economic problems.

Issued by COSATU