SA is known for its consultative democracy. Upon the dawn of 1994, green papers and white papers were the prime policy occupation of the new government as it went into consultation mode overdrive. This emerged side by side with rapid implementation of the delivery of water, sanitation, electricity, housing, health and education.
The South African Reserve Bank has lately added to our ritual of consultation. .
On November 21, the Bank published a consultation paper titled “A new framework for implementing monetary policy in SA”. This is a subject I have no knowledge of, but one that citizens will either benefit from or incur losses from.
From the acknowledgment list in annexure 5 of the report, the luminaries the report benefited from is impressive. They are from the Bank of England, the Bank for International Settlements, the Bank of Mexico, the European Central Bank, the Federal Reserve Bank of New York, the International Monetary Fund, the Reserve Bank of New Zealand, the Reserve Bank of Australia, SA's National Treasury and, last but not least, from the relevant line departments in the Reserve Bank.
The Bank draws conclusions in relation to the position it is advocating: “The purpose of this paper is to introduce an alternative framework for implementing monetary policy in SA. Based on a review of global practices, the SARB is proposing to adopt a ‘tiered floor’ system in SA ... The system would provide a superior tool for dealing with excess liquidity, replacing less-efficient instruments now on the SARB’s balance sheet ... It would also be a relatively simple mechanism”.
As I pointed out, this is not my area of knowledge base, so I do not hold an opinion as to which gravitational force the SARB should be inclined to. My contribution focuses not on the subject of consultation but on the process of consultation.
The question I ask is whether the consultation is just a farce — or does it truly engage meaningfully? This question is posed primarily against the debates on the role of the SARB, not only under the Covid-19 conditions, but on, among others, the quantitative easing that many have called for.
It remains to be seen how the Covid-19 shocker is propelling our systems into changed policy positions that address historical problems of unemployment, inequality and poverty.
Whether the consultation by SARB will open up the space to address these historical problems remains to be seen, as the Bank says: “The onset of the Covid-19 pandemic has highlighted the urgency of reform, prompting the SARB to accelerate its efforts — a process which has culminated in the reform proposed in this paper.”
But in the same call for reforms and consultation, SARB is quick to set limits: “It is nonetheless important to note that this reform is not a prelude to quantitative easing, a well-known type of central bank asset purchase which is not required in SA.”
Many have argued that the GEAR plan was sneaked through the back door and was never consulted upon — unlike the RDP, which underwent rigorous consultations
The SARB, after consulting the central banking luminaries and putting up a paper, is calling for public consultations. Surely an expert subject such as this one cannot be thrown at the South African audience for opinion?
The SARB cannot claim not to know local experts and protagonists on this subject. These local experts should have been invited as part of the consultative process that produced the paper that has now been placed before us, sadly already with a preferred or taken position.
The local experts, supported with resources from the Bank, should have been called upon to research and present expert views in a series of seminars. Such positions would extend well beyond monetary policy and would secure the implications of various options on economic and social policy, as this implementation framework will of necessity have wider macroeconomic implications.
Once that is done, the SARB could call for consultations on options from the public.
As it stands, the Bank has reduced this crucial decision point in the history of SA to “tips for a budget speech”.
Many have argued that the GEAR plan was sneaked through the back door and was never consulted upon — unlike the RDP, which underwent rigorous consultations. The National Development Plan was extensively consulted upon, though it never had an implementation plan. The issue of land restitution had meaningful public consultations before it bit dust in parliament this week.
Stats SA consults extensively on subjects that demand an expert view. This is particularly on the evaluation of census methods and results, as well as economic statistics.
In this regard Stats SA puts resources at the disposal of local and international experts who advise both the statistician-general and the Statistics Council on their findings. These two institutions, after due diligence, put such matters to the public for consideration.
What the SARB has done is similar to what the National Treasury did with the paper of August 2019 titled “Economic Transformation, Inclusive Growth, and Competitiveness: Towards an Economic Strategy for SA”, which it said was extensively consulted on.
My scepticism about this so-called consultation causes me to ask how much more contradictory and paradoxical can this be: it is precisely Covid-19 with its quantitative-easing issues that has hastened the need for the reform the SARB is undertaking — but “quantitative easing is not needed in SA”. This is an expression of South African exceptionalism par excellence.
And this is GEAR déjà vu unfolding in front of our eyes.
• Dr Lehohla is the former statistician-general of SA and former head of Stats SA
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.