Durban - Leading academics have cautioned against what they called populist views which call for the South African Reserve Bank (SARB) to change its mandate, warning that such moves could see the country’s economy unravelling like Zimbabwe’s.
Political economist at the University of Zululand, Professor Irrshad Kaseeram, was reacting to threats of a march to SARB offices by the ANC and its alliance partners Cosatu and the SACP.
Speaking at a briefing, ANC KZN secretary Bheki Mtolo accused the bank of pushing many workers to the brink of bankruptcy over its continued increasing of interest rates in the past few cycles. He accused the bank of being irresponsible, insisting rate increases had made many consumers unable to meet their financial obligations.
“During lockdown the interest rates dropped and enabled workers to have money to purchase goods and services, and this also led to growth in the agriculture sector during the same period.”
He added that such gains had been wiped out by SARB’s raising of the rates.
“This act of inflation targeting has led to huge amounts of money taken out of the country’s economy, disempowering the workers in the process, and that is why we will be marching to their headquarters soon,” Mtolo said.
According to Cosatu KZN secretary Edwin Mkhize, workers were battling to make ends meet because of high living costs that could be linked to the rise in interest rates.
However, Kaseeram questioned the motive for the march, calling for greater introspection both in the alliance, as well as in the government and the private sector.
According to the academic, changing the Reserve Bank’s mandate would have devastating effects on the economy. He cited Zimbabwe where former president Robert Mugabe had sought to intervene in central bank operations, a move which devastated the country’s economy.
“How long has it been since president Mugabe died? But the effect of his actions are felt to this day, which is why you see many Zimbabweans cannot stay in their country owing to the economy that was ruined by populist policies,” said the academic.
He expressed the belief that a gathering involving organised labour, the government and business, driven by the intention to put the country first, had the potential to yield results.
“Many years ago in Singapore, a country which does not have as many resources as South Africa, its leader called such a gathering and asked all the leaders there to put the country first, and the end result was that the country’s economy performed well, employing the working population.”
He said it was important for the government to get the fundamentals right to absorb the many unskilled workers.
Another economist, Professor Bonke Dumisa, issued a similar warning, pointing to the fact that the experience of high interest rates was not unique to South Africa, but had been prompted by Russia’s invasion of Ukraine more than a year ago. He pointed to the rise in the crude oil price and the knock-on effect this had had on the entire value chain.
“The Reserve Bank is not inhumane, but is simply doing what it was set out to do in the first place, which is to control inflation,” said Dumisa, adding that the bank’s main challenge was that it used a blunt instrument when targeting inflation, saying this should change.
He said that while he expected another repo rate increase in future, anything beyond 25 basis points would provide ammunition for comments that the bank was irresponsible. The date for the march has not been determined.