On the mandate, ownership and independence of the South African Reserve Bank

Cobus Vermeulen

doi:10.4102/sajems.v23i1.3416

Abstract

It has been suggested that the South African Reserve Bank (SARB) is not doing enough to support economic growth and employment creation. There is confusion in the public debate, however, as three distinct concepts - the SARB's mandate, ownership and independence - are often inaccurately lumped together and misinterpreted. This clouds the debate, and hinders progress. This article attempts to focus and stimulate the academic debate by distinguishing between these three distinct, yet interrelated, concepts, and to clarify misunderstandings and misinterpretation. It also suggests some avenues through which each could be investigated further, and how different dimensions to the problem could be considered independently.

Highlights

Against the backdrop of a poorly performing economy, high unemployment and pervasive poverty, as well as a growing international discontent with the conduct and approach of central banks, the role of the South African Reserve Bank (SARB) in the South African economic policy debate has been questioned
19.There seems to exist a misconception that the SARB’s shareholders have access to gold and foreign exchange reserves held by the central bank on behalf of the government
Gold and foreign exchange belongs to the government, while the SARB is only responsible for the management thereof

Summary

Introduction

Against the backdrop of a poorly performing economy, high unemployment and pervasive poverty, as well as a growing international discontent with the conduct and approach of central banks, the role of the South African Reserve Bank (SARB) in the South African economic policy debate has been questioned. The ruling African National Congress (ANC), at its 54th National Conference, revisited the mandate of the SARB, and concluded that: Without sacrificing price stability, monetary policy should take account of other objectives such as employment creation and economic growth. Independence means that the central bank has the autonomy to pursue its goals, without its notional ‘owners’ (be they private individuals, the government or some combination) dictating how it should go about things Having separated these concepts, key questions or areas of debate can be teased out, and each addressed within its own paradigm. This would be consistent with the global standard where shares in the majority of central banks are, owned by their respective governments This creates the expectation – and implication – that the government should buy out private shareholders, taking the SARB into national ownership. The fact that very little evidence on this relationship is available – for developing economies – suggests a need for further empirical investigation

Conclusion

Findings

Data availability statement