The Federation of Unions of South Africa (FEDUSA) says amending the South African Reserve Bank (SARB) Act to change the Bank’s primary mandate from that of protecting the rand to intervening in socio-economic challenges facing the country will corrode its value.
In her Report on SARB’s apartheid era lifeboat to Bankorp – now ABSA-Public Protector Busisiwe Mkhwebane has proposed that Parliament amend clause 224 (1) of the Constitution which provides that “the primary object of the South African Reserve Bank is to protect the value of the currency in the interests of sustained and balanced growth” to read: “the primary object of the South African Reserve Bank is to promote balanced and sustainable economic growth in the Republic, while ensuring that the socioeconomic well-being of the citizens are protected”.
“As one of NEDLAC social partners, FEDUSA believes that the proposed amendment is inappropriate. The primary mandate of the Bank is to protect the value of our currency from high inflation which is public enemy number one, since it decreases the amount of goods that money can buy, making life difficult for workers and the poor,” says FEDUSA General Secretary Dennis George.
“Inflation erodes the purchasing power of workers and the poor by eating into the value of the currency over time and encouraging them to spend rather than saving their hard earned wages. It is important that workers be allowed to share in the growing prosperity as this will result in wages and salaries increasing at a rate that is equal to inflation plus productivity growth”.
The union federation says instead of tempering with the primary mandate of the Bank- which has served the country so well – other inclusive economic policies that could take better care of the socioeconomic well-being of our people, such as those announced in the 2017/18 Budget by former Finance Minister Pravin Gordhan in which close to R884 billion would be spent is spend on social services including R320 billion for education, R187 billion for health, R195 billion for social infrastructure and public transport, as well as R180 billion that will be spent on social protection among other allocations.
“It is important to look deeper at social protection, this is where former Minister Gordhan’s Budget protected the poor; he allocated R64.5 billion for old-age grants, R 56.3 billion for child-support grants and R 21.2 billion in disability grants. This massive social spending was in addition to large contributions made by the employers and workers to the Unemployment Insurance Fund,” to protect workers when they are unemployed said George.
FEDUSA is pleased that the number of social grants in South Africa has increased exponentially over the past twenty years from an estimated 4-million in 1994 to more than 17 million by February 2017. Although there is a growing chorus of voices warning that these numbers are not sustainable in the long term, FEDUSA believes that it is important that we protect the poor and unemployed in our country.
“According to Statistics South Africa figures released in February this year, more than 17 million grants were paid to nearly 11 million people and even
though President Jacob Zuma complained in 2011 that government ‘cannot sustain a situation where social grants are growing all the time and think it can be a permanent feature’, it still is important that we must care for the poor,” he said.
George said former President Thabo Mbeki and NEDLAC social partner leaders in the Presidential Working Group who met formally regularly, transformed the focus of monetary policy by adopting the inflation-targeting framework with the band between 3 to 6 percent in August 1999 and was introduced by the Monetary Policy Committee (MPC) in February 2000
He said social partner leaders understood that monetary policy could not be the only factor to contribute directly to economic growth and employment creation in the long run. However, by creating a stable and supportive financial environment, monetary policy, therefore accomplishes an important prerequisite for the achievement of economic development. The diagram illustrates the contribution of the inflation-targeting framework to monetary stability.