Reserve Bank Governor Gill Marcus told MPs on Tuesday that the expanded mandate of the bank passed to her by Finance Minister Pravin Gordhan last Wednesday, which explicitly requires the bank to consider economic growth and job creation, does not mean that the bank has a specific role in these matters.
She also made it clear that there is a case for amending the bank’s constitution to deal with the private shareholder issue, which she said is creating ‘a negative environment’.
“The mandate is about what we consider when we take our decisions,” she said. “All these issues are matters that we consider when we look at what is happening to the exchange rate, what is happening in terms of the labour markets, we look at these things. What the mandate has done is explicitly indicate that you must take account of these things.”
She said the mandate does not tell the bank how to interpret the situation, but its does emphasise its public responsibility. Ms Marcus told a joint meeting of the finance and appropriations committees of both houses that what she thought important was the flexibility that the mandate emphasised.
“South Africa is not an inflation nutter,” she said. “The inflation target is a tool, but to get back into the band you need to take account of what is happening in the real economy. As long as everyone understands what is happening, and that you will get back into the band – you don’t need to be back in the band next month. So you don’t have to make extreme adjustments.”
The Governor was also asked about the private shareholders in the bank, with one ANC MP suggesting that the bank might need “to be integrated into the government.” She explained that the board of the bank – on which seven private shareholder representatives sit – is not a board that decides policy.
It merely decides governance issues, and no one is going to get rich by being a shareholder. However the governor complained that when shareholders are out of tune with the objectives of the bank ” it does make a very difficult working environment”, especially around the annual general meeting of the shareholders.
“You expect them to consider what is the best outcome for the organisation, not how can I do better out of this organisation.” That is becoming quite a fraught area and we do need to look at ways we will deal with it because it is extremely unhealthy for it to function like this, she said.
“The board should have the most prestigious board with the best quality people on it that can guide you through all the issues. I think that is a huge challenge in this environment. We have to look at how we get people on to the board and what is the process. I think it is a negative environment,” said the governor.
Source: www.businessday.co.za, 20100224
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