S.Africa unions want central bank to be state owned

South Africa’s powerful COSATU trade union federation called on Tuesday for the central bank to be stripped of many of its powers and taken into state ownership.

“The Reserve Bank is not neutral. It is not like you can afford to have it as a bank of private citizens with money,” COSATU Secretary-General Zwelinzima Vavi told Reuters on the sidelines of the labour group’s annual conference.

“If you do that you sideline the state itself and all the constituencies in society, including labour. The Bank must be state-owned and run.”

The South African central bank is one of very few in the world owned by private shareholders, who have the right to appoint half the board of directors, but have no say in its day-to-day operations or policy.

COSATU, with 1.9 million members, helped President Jacob Zuma come to power in April but it said at the conference that the government could not count on its unconditional support.

The labour federation condemns policies it sees as too pro-business and has gone head to head with Zuma over a series of pay strikes. He has shown no sign of bowing to union demands.

The unions want more government spending, and an end to inflation targeting by the central bank, which they blame for sharp interest rate increases last year. They also want a seat on the bank’s board and for it to come under full state control.

“We propose cutting the powers of the Reserve Bank. There must be a refocusing and we must ensure that that focus is not just about inflation but the entire manner that the country is moving, looking at the impact of its policies on jobs, poverty, inequality, and growth of the economy,” said Vavi.

The Reserve Bank’s governor and deputies are appointed by the president, but it operates independently under a mandate to target inflation at between 3 and 6 percent.

Speaking later at an accountants’ dinner, Reserve Bank Governor Tito Mboweni shrugged off the criticism.

“We have been able to provide monetary accommodation in these difficult times but no one is ever satisfied,” he said, referring to COSATU’s demand for more than the 5 percentage points in interest rate cuts made since December despite stubborn inflation.

The central bank’s monetary policy committee (MPC) met earlier on Tuesday and decided to keep the repo lending rate at 7 percent, citing balanced inflation risks and signs of improvement in the local and global economy.

“After the MPC meeting I went to the COSATU conference (and) I was told there was a lot of criticism, but they were friendly. I enjoyed myself and I’m going back tomorrow morning,” he said.

Reuters.

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