About this site

This resource is hosted by the Nelson Mandela Foundation, but was compiled and authored by Padraig O’Malley. It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.

Reserve Bank - Independent of whom?

"The government has changed but the goals of the Reserve Bank remain the same."That is the smug sub-title to an article in a recent Financial Mail supplement on the South African Reserve Bank. The message will be of great comfort to the main readership of the Financial Mail - those in our country who want life to remain the same even if the government has changed.

The Financial Mail is certainly not wrong to portray the Reserve Bank as an unchanged institution. Its governor, Chris Stals, has been re-appointed for a second five-year term. Like Stals, the Deputy Governor, the Senior Deputy Governor and the

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not surprising. More serious than attitudes are the actual policies that the Bank continues to impose on our country.

In particular, the hall-mark of Stals's monetary policy is the defence of the rand and the attempt to kill inflation by maintaining punitively high interest rates - that is, a high price for borrowing money. In September Stals once more raised the interest rate, probably wiping out hopes of an effective economic recovery in the coming year. As Charles Millward and Vella Pillay recently pointed out, Stals's obsessive, one track strategy (keeping the interest rate high) strikes heavily and disproportionately at ordinary consumers and small business. "Large corporates", they write, "with direct access to the money markets avoid much of the pain."

As the RDP has noted, the essential problems in the South African economy are deep-seated structural problems, requiring major transformation. Instead of working in tandem with this general policy of major restructuring, the Reserve Bank's "knee-jerk reaction", Millward and Pillay write, "is to pressure the most vulnerable sectors - consumers and small business - by reducing disposable incomes. Give your money to the banks rather than waste it on Japanese television sets is [Stals's] clear message. Stals's great strategy of defending the rand and fighting inflation looks progressively more hopeless."

Central banks in developing countries

Paul Bowles (University of Northern British Columbia) and Gordon White (Institute of Development Studies, University of Sussex) have recently produced a valuable study on central (or reserve) bank independence. The needs of developing countries, they argue, are quite different from the advanced capitalist economies.

It is worth quoting the core of their argument at some length: "One of the key institutional characteristics of the successful East Asian late developers [South Korea, Taiwan and China] has been their control over their financial systems. The NICs [newly industrialised countries] and China have used their financial systems as a crucial part of an overarching state led development strategy. In particular, the low interest policy loan has been a central feature of government policy in determining investment priorities, allocating capital and shaping industrial growth...In all of these cases...states have followed an interventionist industrial policy premised on the logic of the theory of late development, in which low interest rates for long term credit have been used to channel resources into specific sectors. This has only been possible because the policies of the central bank have been determined within the general development policy making framework...The central banks in these three countries have therefore had relatively circumscribed roles and have generally operated as but one, often subordinate, player in the government apparatus."

All of this contrasts fundamentally with the role played by central banks in the advanced capitalist economies. In the case of Taiwan, South Korea and China "the central bank is a part of the institutional framework of the developmental state and as such is assigned a role quite different from that envisaged in the Northern debate of an agency existing beyond control with a single mission of price stability."

It is quite obvious that with Stals's Reserve Bank we are aping an absolutely inappropriate model. Stals's Reserve Bank is inimical in outlook, composition and policies to the huge reconstruction and development that confronts us in SA.

Time for change

It is time that the Reserve Bank was transformed. The original Reconstruction and Development Programme is quite clear about this: "The Interim Constitution contains several mechanisms which ensure that the Reserve Bank is both insulaced from partisan interference and accountable to the broader goals of development and maintenance of the currency."

The new RDP White Paper repeats this correct formulation more or less word for word even if it now overemphasises the role of "high real interest rates". In the original RDP there was also some brief elaboration on how non-partisan independence within a developmental context could be achieved: "the law must change the Act governing the Reserve Bank to ensure a board of directors that can better serve society as a whole. The board must include representatives from the trade unions and civil society. In future, a stronger board of governors should emerge through the appointment of better-qualified individuals."

Isn't it about time we followed the RDP's advice?

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(Ogilvie Thompson is, of course, too modest to say who will be the main beneficiary of any privatising.)

. Chris Stalls (De Klerk's governor of the Reserve Bank and now "our" governor of the Reserve Bank), says he too now supports the RDP. In fact, he has proposed a marriage between the RDP and the National Party's old Normative Economic Model. That sounds to me like the frog threatening to kiss the princess.

This, then, is our first struggle, comrades: To defend the integrity and fundamental principles of the RDP.

What are these fundamental principles?

A programme based on social needs

The RDP is an economic and social programme to return our economy to stability and growth THROUGH meeting the basic needs of our people - jobs, houses, affordable health-care and education. It is a programme for the construction of major rural and urban infrastructure - water, roads and electricity.

The RDP says we must judge its success or failure on whether it begins to meet these basic social needs.

For the RDP, the basic measure of success or failure is not our inflation rate, or the level of government spending, or whether we meet (and even improve by 50%) the trade liberalisation measures that GATT demands.

We may, or may not, have to reduce inflation or government spending. We may, or may not, have to meet the GATT requirements.

Whether we do or not, must depend on whether these measures will help us to meet in a sustainable way the social needs of our people.

In the SACP we are not arguing for "macro-economic" populism, or for fiscal indiscipline, or for a soaring inflation rate. But we are saying that fiscal discipline, or a particular level of government spending, or GATT agreements are not sacred cows. They must be instruments for meeting our basic social goals. They are not ends in themselves.

Redistribution and Restructuring

But where will we get the resources to implement the RDP?

Some argue that our principal hope lies in foreign funding.

No doubt, foreign aid and investment will need to play a role in the RDP. Although we must look very carefully at much of this "aid". Figures of several billion rand are quoted. But the great bulk of this money is very often earmarked as special subsidies for British exporters, or Japanese exporters, or US exporters. Or it is fees for foreign consultants of all kinds. Much of it is not money coming to SA, it is money staying in the donor country. It is money to improve the competitive edge of British business against its Japanese, or French, or German competition.

What we get, as South Africans, is often technology or imported commodities that we don't particularly need. Which causes job losses here in SA. And which goes on to build a lifetime of dependency.

Others argue that the RDP can be funded from all sorts of gimmicks - lotteries and casinos.

But what does the RDP itself say?

It says that it is a programme of redistribution and restructuring.

Take just one example. Last year in SA we spent more on education than the entire annual Gross National Product of Tanzania. Yet there is a better literacy rate in Tanzania than there is in SA!!

That simple example tells you something. It tells you that there are resources in SA after all.

And that is why the RDP is fundamentally about redistribution and restructuring. It is a programme to ensure the redirection of resources, wealth and opportunities.

But we all know that resources don't just redistribute themselves. Money doesn't spontaneously throw itself at the poor. Opportunities are not just going to migrate into themost marginalised rural areas of our country.

And that is why, THIRDLY, the RDP is

A people-driven programme

One of the most subtle strategies to undermine the RDP is to place massive pressure on the government to "deliver". And all of us are falling into that trap. We are all tending to sit back and wait for government to "deliver".

This, in turn, creates enormous pressures on our comrades in government, and it can' quickly lead to them taking all kinds of shortcuts - striking deals with the devil, quick-fix schemes that simply cannot be sustained.

We certainly need the co-ordination and initiative of government. But unless we organise, struggle and assume responsibility for the RDP ourselves, we will not have an RDP.

This brings me to the question of the recent wave of workers struggles. Many of you will know that the SACP spoke up very early on in these strikes to say that it was absolutely wrong to portray them as being in contradiction with the RDP.

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present wave of strikes we also called on workers to broaden their demands from wage demands (to which they have every right) to other more fundamental issues as well. Issues that begin to address the question of the restructuring and democratisation of production - an end to top-down management authoritarianism, an end to racism on the shop-floor, continuous training and upgrading of workers, greater levels of co-determination on investment decisions. These and many other transformational demands need to be placed more and more in the foreground.

Gravy train

The SACP and COSATU have been together in the forefront of the struggle against the gravey train in the upper echelons of the public sector. We pledge to continue this struggle.

Our concerns are threefold

. in the first place it is scandalous that huge amounts of money are squandred.

. in the second place, we condemn the terrible gap that exists between the lowest and middle order of salary scales in the public sector and the higher echelons. The Melamet Commission, in making its recommendations, said that we need to look at private sector wages and salaries. But, comrades, private sector salaries in SA reflect not merely an unjust capitalist culture, but, worse still, the results of years and years of racist oppression. Nowhere in the world will you find such a steep climb from the lowest wages to the highest salaries. There is no way that a new democratic SA can simply reproduce that reality without asking questions, both in the public and in the private sector.

But our concern is also a practical, political concern:

. our strategic opponents failed to elect the government they wanted. Now they want to infect the government we elected. If we are not careful we will go quickly from a majority elected government, to a minority infected government. The transfer of power will turn out to have been the transfer of privileges. We are not saying that this has happened here yet. It has certainly happened in many other countries. We have a duty to make sure it doesn't happen here.

. International

There is another area of political life in the new SA that concerns us as a Party.

There is an enormous naivete about the international situation. How often do we hear lovely phrases like: "SA can now take its rightful place among the family of nations."

Comrades, the world out there is not a family picnic to which we are now invited.

Last year, 23 million people died of starvation in a world which is not short of food. 1 000 million people live in absolute poverty in the so-called Third World. But there is also a third world within the First World. A black American boy born today, statistically stands a better chance of ending up in prison than in university.

Through the 1980s the sadomonetarist policies of Thatcher, Reagan and Chris Stals (the one who wants to marry Reaganomics and the RDP) rolled back the social gains of the poor and working people in the North, and devastated the Third World, not least our own continent. Through the IMF, the World Bank and agreements like GATT they have opened up Third World economies to their own agendas, while erecting massive protectionist barriers around their own economies. The US, which so continously preaches trade liberalisation, is one of the most protected economies in the world.

That is the world we are "joining". We are joining it, not as a pick-nicker, but as a potential sandwich.

This is why, comrades, our RDP must be based as much as possible:

. on our own resources

. on our own needs

. on an inward industrialisation, on a massive programme of South African urban and rural infrastructural development. Insofar as we prioritise beyond our own borders it should be, in the first place, to our southern African region that we turn.

The RDP is not, and should not be, essentially an export-led growth path. The more you depend on exports, the more vulnerable you become to the dictates of the powerful economies to which you are exporting.

This is the increasing fate of South Korea, for instance. Once the Cold War darling of imperialism, South Korea is now seen essentially as a trade competitor by the US. Each year that goes by sees increasing pressure on South Korea to shut down more and more of its agricultural sector so that the US can export food to a country that was once food sufficient. When a country like South Korea gets to be too competitive with US firms, the US simply passes "anti-dumping" legislation.

We are not saying that SA can neglect exports.

But we are saying that we must not be naive about the realities of the world in which we are living.

This is why we are concerned when the Trade and Industries Minister says in Parliament in his budget speech that "competitiveness" is the key to our Trade and Industry policies. Are we going to be competitive with Indonesia (where comrade Madiba has just visited), a country in which the military regime has just banned the one independent trade union federation?

Our international policy needs to be based much more on solidarity with working class and democratic struggles. This is the just course, and it makes economic sense too.


In November COSATU and the SACP, following a resolution of your Special Congress last year, will be jointly convening a Socialist Conference for Reconstruction and Development. At that Conference I am sure that we will reaffirm the basic perspective I have tried to out-line today.

Socialism is more relevant than ever. Socialism is not a foreign country. Socialism is not some utopian dream. Socialist perspectives, socialist morality, socialist understanding needs to inform our daily struggles, right now.

Socialism is about building an economy based on social needs, not private profits. Socialism is about rolling back the empire of market totalitarianism. Jobs, shelter, health-care, education - these are not commodities. They are basic human rights.

Socialism is about transforming the power on the markets. The markets in SA are not some natural force like the weather. The markets in SA reflect decades of racial oppression and capitalist exploitation. Let us use the RDP to empower workers, poor communities, rural people, and many others on the markets.

Socialism is about international working class solidarity. Socialism is about the co-operation, not the competition, of workers from the South and the North.

about daily democracy, not just democracy every four or five years. Socialism is about democratising all power. Who said socialism is irrelevant? Who said socialism is dead?



This resource is hosted by the Nelson Mandela Foundation, but was compiled and authored by Padraig O’Malley. Return to theThis resource is hosted by the site.