Finance Minister Malusi Gigaba says he does not believe the public protector has the power to order Parliament to change the Reserve Bank’s mandate, but he also believes none should fear a debate around the issue.
Speaking at a business breakfast at the ANC policy conference which kicked off in Johannesburg on Friday morning, Gigaba told delegates that he was engaging with the office of the public protector to understand the situation better but he said he was of the view she did not have the power to direct Parliament. “Where changes [to monetary policy] are necessary, these should be directed to the finance minister.”
The public protector’s recommendation that Parliament seek to broaden the South African Reserve Bank’s mandate is currently the subject of a legal challenge from the Reserve Bank itself.
The outcome of a legal challenge of the public protector’s recommendation is important, as her recommendations have been found in recent cases brought before the courts to be binding.
“I don’t think anyone should panic,” said Gigaba, noting South Africa’s strong legal framework, “but no one should fear a debate.”
Setting the tone for the policy conference ahead, which will come to a close on Wednesday next week, Gigaba reiterated much of what is stipulated in the ANC policy conference discussion documents on economic transformation.
Radical Economic Transformation policies, he said, would automatically result in an inclusive economy with a new structure working in favour of the poor. A call for Radical Economic Transformation was a call to return back to the basics, he said.
Gigaba said failure to act could risk South Africa falling into a low-growth trap where the nation would “have to seek assistance from quarters we have so far avoided”. This likely refers to financial assistance from developmental financiers like the International Monetary Fund.
He said South Africa needed to overcome the triple challenges of unemployment, inequality and poverty, and that the state, private sector and social partners must work together in order to have any success.
He noted the need to develop the country’s industrial base, its rural economies and to deepen regional integration.
Gigaba said the state must play a role to grow the share of assets under the control of black fund managers. Expanding on this, he said this would involve a “review of the PICs [Public Investment Corporations] role in driving transformation instead of it being seen narrowly as an instrument for empowerment of a few elites.”
Black auditing firms, he said, are a low hanging fruit which should be given the majority of work at state-owned enterprises – a decision within the state’s power.
The test of government’s economic policies are whether they impact growth and enhance the lives of country’s poorest, he said.
The state should do these things not out of fear of losing investor confidence and being further downgraded by ratings agencies, but rather “because they are they right things to do,” Gigaba said.
The negative features of the South African economy include its high levels of inequality, its high carbon intensity, as well as it oligopolistic and monopolistic characteristics which make it difficult for new, mainly black, business to enter the market with negative consequences for consumers.
“These are amongst the main features of the economy we must change,” said Gigaba. “At the same time we must grow the economy.”
As envisioned in the National Development Plan, Gigaba said the economy needed to grow at 5% annually on a sustainable basis as opposed to the 2% it has averaged in recent years. “Clearly this is insufficient, we are under performing and barely scratching the surface of our economy’s potential.”
Gigaba stressed the need for the private sector to work with government in its transformation aims. “We need business people who understand transforming South Africa is in everyone’s interest. A more inclusive economy will mean a bigger economy.”
Gigaba said a government to enhance growth and to respond to the structural reform challenges will be released in the next few days.
ANC treasurer general Zweli Mkhize told delegates meaningful growth cannot be anticipated on the back of concentrated ownership in the economy with “no mechanism to open up the economy 23 years later”. The ANC couldn’t escape the discussion anymore, he said adding that people in poor communities needed to feel this democracy has delivered.