No need to change SARB – capitalism’s doing fine in reducing unemployment

The ANC/SACP demand for a shift in the mandate of the South African Reserve Bank (SARB) is supposedly motivated by the urgent need to overcome the country’s unemployment crisis and quicken the growth rate.

The real purpose of the mooted change, however, is to further cripple the capitalist economy and so advance the ANC’s national democratic revolution (NDR), with its socialist and ultimately communist aims. 

As the SACP put it earlier this year, the SARB’s mandate, as set out in the Constitution, was not designed ‘with the objectives of the second [radical] phase of [our democratic] transition in mind’. That is why change is necessary – and why the ANC’s election manifesto commits the ruling party to implementing such a shift.

It is ironic that the demand for change – wreathed as it is in the fig-leaf of combating joblessness – comes at a time when the US, the UK, and various other OECD countries have notched up the lowest unemployment rates in decades. 

The NDR assumption, of course, is that capitalism cannot succeed at overcoming joblessness. Hence, the ‘developmental’ state must step into the breach, using all the instruments at its command – including the capacity to lower interest rates and print money.

In the US, however, the jobless rate has fallen to 3.6%, its lowest level in some 50 years. In the UK, despite the Brexit turmoil, unemployment is at a near record low. In many other OECD countries, the jobless rate has dropped below 6% and is at its lowest in decades. 

Wages are going up too. As The Economist reports, ‘as firms compete for workers rather than workers for jobs, average wage growth is rising, pushing up workers’ share of the pie’. In addition, the incidence of ‘low pay’ – employees earning less than two-thirds of the median wage – has been falling for two decades. 

Demand is highest for skilled employees, but employers are also recruiting among people generally left out of the labour market – ex-convicts and the disabled, for instance. ‘The jobs boom is helping solve social ills without governments having to do or spend very much,’ comments The Economist.

The upsurge in employment in the US and other Western countries gives the lie to the ANC/SACP claim that changing the SARB’s mandate is essential to overcome the crisis of joblessness in South Africa. 

The real problem is rather that the ANC’s NDR policies have steadily been pushing up the unemployment rate for 20 years and more. Putting an end to those policies – instead of using their negative impact to push for yet another damaging NDR intervention – would be far more effective in countering joblessness.

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Instead of meddling with macroeconomic policy, the ANC should roll back its existing NDR policies. These include:

  • the coercive labour laws that increase the risks and costs of employing people and largely price the unskilled out of the labour market;
  • a steady erosion of property rights, which started with land, mineral resources, water, and BEE and now threatens pensions, medical aids, private health care, and intellectual property (copyright as well as patents); and
  • the ANC’s rejection of the constitutional accord it previously pledged to uphold, marked by its determination to change the property clause and the SARB mandate and white-ant other constitutional provisions acting as a brake on the NDR.

Moreover, the SARB already takes employment and growth into account in deciding on interest rates and other issues. This is consistent with its current constitutional mandate, which is primarily to ‘protect the value of the currency in the interest of balanced and sustainable economic growth’.

The claim that SARB governor Lesetja Kganyago (in the words of BEE proponent Duma Gqubule) ‘refuses to consider issues of employment and economic growth’ is false. It is part of a mounting propaganda (‘fake news’) campaign aimed at creating an illusion of broad support for changing the Bank’s mandate.

The truth lies rather in what Mr Kganyago has repeatedly warned: that people who want to ‘engineer a short-term boom’ and ignore the long-term costs ‘don’t like it when the long- term shows up’ – which is usually about two years after the implementation of their ‘quick-fix policies’.

Mr Kganyago is also correct to caution that South Africa’s high levels of poverty and unemployment are ‘not reasons to gamble with macroeconomic stability’. Rather, they mean that the country has to be ‘extra careful about managing the system carefully, so it doesn’t blow up’.

In addition, post-1994 data shows the unemployment rate dropped significantly when real annual growth rose to more than 5% of GDP between 2005 and 2007. At the start of 2019, many economists expected growth to rise above 1% of GDP this year: not nearly fast enough to counter unemployment, but better than the meagre 0.8% achieved in 2018. 

Many analysts now question whether growth of even 1% can be attained. What the mounting threat to the SARB’s independence has done is help slash various growth forecasts to 0.5% or less – and leave the unemployed with even fewer prospects of ever finding work.

Dr Anthea Jeffery is Head of Policy Research at the IRR. Jeffery is also the author of People’s War: New Light on the Struggle for South Africa, now available in all good bookstores and as an e-book in abridged and updated form.

First published on Daily Friend

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