AN INDEPENDENT SOUTH AFRICAN RESERVE BANK IS IN OUR BEST INTEREST – ABSIP
JOHANNESBURG, June 9, 2019 – The Association of Black Securities and Investment Professionals (ABSIP) said on Thursday given its role as a key macro-economic institution, its importance as enshrined in the constitution, the South African Reserve Bank’s mandate and independence should be jealously preserved.
Commenting on the debate on the bank’s mandate, ABSIP President, Sibongiseni Mbatha, called on all South Africans, including political leaders to respect the independence of the SARB as enshrined in the constitution.
“Our constitution is clear on the mandate of the SARB. According to section 195 to 197 of the constitution, “the primary objectives of the South African Reserve Bank shall be to protect the internal and external value of the currency in the interest of balanced and sustainable economic growth in the Republic and ….., in the pursuit of its primary objectives, it shall exercise its powers and perform its functions independently….”
“As we seek to stabilise the economy, the bank’s attention should remain as enshrined in the constitution – price stability, but in so doing it must take into account economic growth and not be blind to unemployment, poverty and inequality.
“Of course, the SARB is a public body fully accountable to both parliament and the South African people. Its constitutional existence provides for its independence from all sectors of the South African society, including politics and business, in executing its mandate. The bank, as one of the institutions which must serve South Africans through generations, should be insulated from short-term political agendas from policymakers outside of parliament,” said Mbatha.
“Economic research shows that a nation’s economic interest is best served by a central bank that is independent of short-term political pressures. Typically, countries with independent reserve banks have lower rates of inflation and higher growth in their standards of living than those that do not.”
“When monetary policy is not independent from government finance, hard decisions about who pays for government expenditures can be avoided by forcing the central bank to embark on quantitative easing, also known as large-scale asset purchases.”
“Policy certainty in a stable low inflation economy is essential for investment. Stable and low inflation with above inflation increases for low income earners will contribute to economic growth in the long term,” said Mbatha.
“ABSIP believes that quantitative easing is an unconditional tool that is already available to all central banks in the world including the South African Reserve Bank but should be used under two special conditions and not for political point scoring. The conditions are that
These conditions do not currently exist in the South African economy.”
“Because of its role, the country’s economic health and prospects matter most. We should be wary of any changes to bank’s mandate that can hamper its ability to achieve the best monetary policy for our nation’s economy. The answer to the bank’s role is simple: An independent central bank is in our best interest,” Mbatha said.
ABSIP has become widely recognised as an influential force in the transformation of the Financial Sector as evidenced by its participation in drafting the landmark Financial Sector Charter.
The organisation’s membership includes sub-sectors such as Asset Management, Corporate Banking, Corporate Finance, Corporate Managerial and Financial Consulting, Employee Benefits, Insurance, Investment Banking, Retail Banking, Private Banking, Private Equity, Stockbroking, Treasury and Development Finance Institutions.