More on the Swazi loan “from the Reserve Bank” fallacy

If the SA Reserve Bank is the entity that made the loan, why did it do so? It’s mandate is currently inflation targeting. The “private shareholders” have no interest in lending money to Swaziland at a 5.5% coupon (a real yield of 1% to a country in desperate financial struggles).

No Mr Gordhan, you should never have uttered this foolish statement.

SA Reserve Bank Mandate:


The Reserve Bank is required to achieve and maintain price stability in the interest of balanced and sustainable economic growth in South Africa.

The achievement of price stability is quantified by the setting of an inflation target by Government that serves as a yardstick against which price stability is measured. The achievement of price stability is underpinned by the stability of the financial system and financial markets. For this reason, the Bank is obliged to actively promote financial stability as one of the important determinants of financial system stability.
At present, sections 223 to 225 of the Constitution of the Republic of South Africa, 1996, the South African Reserve Bank Act, 1989 as amended and the regulations framed in terms of this Act, provide the enabling framework for the Bank’s operations. The Bank has a considerable degree of autonomy in the execution of its duties.
In terms of section 224 of the Constitution, 1996, “the South African Reserve Bank, in pursuit of its primary object, must perform its functions independently and without fear, favour or prejudice, but there must be regular consultation between the Bank and the Cabinet member responsible for national financial matters.” The independence and autonomy of the Bank are therefore entrenched in the Constitution.
The Bank has been entrusted with the overarching monetary policy goal of containing inflation. The Bank can use any instruments of monetary policy at its disposal to achieve this monetary policy goal. The implies that the Bank has instrument independence in monetary policy implementation but not goal independence in the selection of a monetary policy goal.
The Governor of the Bank holds regular discussions with the Minister of Finance and meets periodically with members of the Parliamentary Portfolio and Select Committees on Finance. In terms of section 32 of the South African Reserve Bank Act, 1989, the Bank publishes a monthly statement of its assets and liabilities and submits its Annual Report to Parliament. The Bank is therefore ultimately accountable to Parliament.

Published by David Kirk

The opinions expressed on this site are those of the author and other commenters and are not necessarily those of his employer or any other organisation. David Kirk runs Milliman’s actuarial consulting practice in Africa. He is an actuary and is the creator of New Business Margin on Revenue. He specialises in risk and capital management, regulatory change and insurance strategy . He also has extensive experience in embedded value reporting, insurance-related IFRS and share option valuation.

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