Amid growing calls for the central bank to join efforts to deal with unemployment, Kganyago insists it must stick to its mandate.
The government is better equipped than the South African Reserve Bank (SARB) to tackle the country’s unemployment crisis. So says the bank’s governor, Lesetja Kganyago.
Speaking at a dialogue with economic historian Adam Tooze hosted by the Wits School of Governance on the role of central banks on Thursday, March 16, Kganyago said, “Society designs institutions with a particular remit and tasks them with that remit and it is very important that in the design of institutions in society, even with all hands on deck, we do not cause confusion in respect of which institution is responsible for what.”
He said the government should focus on alleviating poverty and creating jobs instead of pursuing failed policies, and added, “The education system has got to be producing particular sets of skills that the economy needs. Absent that, you’re going to have a skills constraint.”
Tooze argued that the commitment of the central bank to a limited focus on financial stability was implausible.
“An entire generation of people, young people in particular, are struggling to find a foothold in the labour market. This is a huge burden of responsibility for economic policy makers to bear and presumably no one can afford to sort of just cleave to institutional narrow fidelity to an institutional mandate in the face of those kind of imperatives and the political pressures that will build up in South African society as a result,” said Tooze.
But Kganyago insisted that central banks must focus on their core mandates and allow government policies to drive structural changes. However, he warned against government adding too many policy targets which distract from the original purpose and intention of policies.
“Whenever you hear public servants say, we want a comprehensive, well-coordinated policy, you know we are going nowhere because, that is an excuse of putting everything in there,” the governor said.
Responding from the floor, Institute for Economic Justice Gilad Isaacs said, “…[It is] about narrow[ing], as if that matters in an economy where a third of the people are unemployed or it’s about undermining the institution of the Reserve Bank and then there’s a trump card of well, if we change our mandate it’s corruption, which then scares everyone as if widening the mandate of the Reserve Bank leads to some sort of capture.
“These are all arguments made to then stay in one’s lane and those of us who argue for a slight broadening on that lane receive these pushbacks,” Isaacs added.
Kganyago countered, “We are not narrow. The Constitution of the Republic of South Africa says we must pursue price stability, in the interest of balanced and sustainable growth in the republic. Price stability is only one contributor to balanced and sustainable growth and you’ve got to bring all the other institutions of society into this thing.”
Wits financial and integrated reporting and investment master’s student, Nqobile Mkhize, who was in the audience, commented that, “I strongly believe that we should not divorce climate change and other environmental issues from the socio-economic matters that you’ve raised.”
“The central bank mandate is [from] a period [of] relative political optimism, optimism about democracy in South Africa and the situation now is obviously much more complex. We need to take these boundaries seriously, but we also need to think creatively about the historical moment that we’re in [concerning climate change],” said Tooze.
FEATURED IMAGE: On top of a youth unemployment level of 43.4%, incomes in South Africa have not kept pace with rocketing food prices. Photo: File
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