SIBONGAKONKE SHOBA | What’s behind lack of debate on minister’s decision?

The introduction of inflation targeting way back in 2000 sparked a fierce debate in the ANC tripartite alliance.

The left within the alliance — the South African Communist Party and union federation Cosatu — protested the new monetary policy, complaining that it would sentence workers to poverty.

The proponents of the policy argued that a 3% to 6% target would protect the currency, lead to economic growth of 6% and create jobs.

But the left within the alliance argued that the target would lead to higher interest rates, slow down economic growth and lead to job losses. Instead, at some point, some on the left argued for a higher target.

There wasn’t much debate in the alliance on the subject on Wednesday, despite our sister publication, Business Times, having revealed on Sunday that finance minister Enoch Godongwana planned to lower the inflation target when he presented the medium-term budget statement.

Former Cosatu general secretary Zwelinzima Vavi became a lone voice, warning about the implications of revising the target down to 3%.

The silence from the left in the tripartite alliance following Godongwana’s announcement is deafening. Of course, the SACP and Cosatu did issue lukewarm statements after Godongwana’s speech on Wednesday — but the tone is different to the loud pushback that followed the National Treasury announcement in 2000.

“It is shocking that this decision hasn’t created much debate in the ANC and the government.”

The lower inflation target is the brainchild of South African Reserve Bank governor Lesetja Kganyago, who has been lobbying the National Treasury for months to lower it.

Godongwana, himself a former trade unionist, was not so long ago opposed to the idea. In August, he issued a harsh statement following the monetary policy committee of the Reserve Bank announcing its intention of pursuing a 3% inflation target.

“As a result of this announcement, an expectation has been created that the minister of finance will make an announcement at the medium-term budget policy statement confirming this move to a 3% target. Minister Godongwana has no plans to do this,” read a statement from Godongwana’s office on August 1.

Three months later, Godongwana announced that the Reserve Bank would pursue a lower target of 3%, saying this “will decrease inflation expectations and inflation, creating room for lower interest rates”.

Godongwana said these long-term benefits “outweigh” the short-term challenges of “lower nominal GDP and revenue growth”.

It is not clear when Godongwana changed his mind. Was it Kganyago’s convincing argument during their meetings, or was it after engagements with global investment firms, as suggested by Business Times?

It is shocking that this decision hasn’t created much debate in the ANC and the government. While there might be merit in the long-term benefits of a lower inflation target, SA has no control over external factors that drive inflation, such as crude oil prices.

The Reserve Bank will be forced to use the sharp instrument of increasing interest rates when these factors become reality. This will hit citizens hard in their pockets.

The lack of a heated public debate over this decision reflects the weakening of the trade union movement and the left-leaning voices in and outside the ANC and the tripartite alliance.

The centrists and the right-wing in the ANC-led government of national unity have taken full control of the government.

The left in the ANC has been weakened, not only in terms of poor leadership and dysfunctional structures, but also a lack of research and thinking capacity.

During the time Cosatu opposed the introduction of inflation targeting, it was backed up by data and research produced by its Naledi Institute.

But the federation’s statement was pedestrian at best, and failed to raise the alarm that lower inflation would mean lower wages for their constituency. There isn’t even a threat to picket at Godongwana’s door.

While the SACP statement captured the effects of lower inflation well in its statement, its promise to “continue mobilising, educating and organising to shift the terrain” is a hollow threat. The party has lost its influence in the alliance.

The ANC, on the other hand, appeared to be clueless about the implications of Godongwana’s decision. The party used to rely on organisations such as Macroeconomic Research Group (MERG), which was later replaced by the National Institute for Economic Policy, in crafting economic policy. These days the crafting of economic policy formulation at Luthuli House is said to be nothing more than thumb-sucking.

Those in the know say the party has no insight into monetary policy.

The party lacks capacity at Luthuli House to deal with such complex issues and relies on government resources for policy. But with cadres who are toeing the GNU line, the party is unable to hold and influence debate on such issues.

Other parties on the left are just out of their depth. The MK Party cannot be trusted to mount a serious campaign on inflation targeting. The EFF is good at sloganeering, but hasn’t so far prioritised monetary policy.

Without a strong voice from the organised working class and the vocal middle class, the National Treasury and the Reserve Bank have free rein.

Sowetan