Reserve Bank mandate not in stone

The reader says it is not true that if/when the Reserve Bank is nationalised it will lose its independence.
The reader says it is not true that if/when the Reserve Bank is nationalised it will lose its independence.
Image: ROBBIE TSHABALALA/Financial Mail

Your columnist Prince Mashele writes in Sowetan of June 10 that Ace Magashule is "using an ANC platform to call for interference with the mandate of the SA Reserve Bank".

This submission does not seek to defend Magashule nor impugn his motives. It also does not defend state capturers.

It is common knowledge that ownership of the SA Reserve Bank (SARB) came under discussion at the ANC elective conference in December 2107.

Magashule as ANC secretary-general pronounced on ANC policies of Nasrec and the recent ANC lekgotla. If Magashule misrepresents ANC policies he should or will face disciplinary action.

It is not the state capturers who want the bank's mandate to include job creation and economic growth, it is the ANC and the people of SA. One of the functions of the Bank of England which was nationalised in 1945 is job creation.

So what's wrong with changing the bank's mandate to include job creation and why shouldn't it be changed? And it is not true that if/when the SARB is nationalised it will lose its independence.

The Bank of England has not lost its independence. The central bank of France has also not lost its independence since it was nationalised in 1935.

Quantitative easing is not a new thing; it was implemented by central banks to stimulate the Western economies after the financial crisis of 2008.

Central banks bought bonds with newly created money earmarked for circulation among the banks and financial markets.

This caused rapid capital flows to developing economies due to higher returns on investments in those countries. This resulted in government debt in the developing countries.

And SA needs more cash liquidity to offset the many socioeconomic problems the country faces.

There are vast social needs - in the fields of science, education, healthcare and infrastructure, to name a few - but as these are not immediately profitable enterprises, they are neglected by foreign investors.

The money for these projects and job creation schemes must come from government, it will not come from Europe or the US. It must come from the bank through quantitative easing.

Otherwise, SA will never solve its poverty and unemployment problems.

Sam Ditshego, Kagiso

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