eBusiness Weekly
Chris Chenga
Just across the Limpopo a subject of pervasive interest is taking place; one of which a majority of developing nations could benefit by conducting their own relative self-introspection.
South African Public Protector, Busisiwe Mkhwebane, recently released a report very critical of the traction, or lack thereof, made by the South Africa Reserve Bank in regards to its intentionality towards influencing desirable socio-economic objectives for the nation’s population.
This is opposed to an accused greater concern by the SARB towards more technical monetarky imperatives such as price stability, money supply, and regulation of a privately owned banking system; imperatives that are perceived to be rigid in their demographic dividend.
The report firmly suggested entire revision of the country’s constitution and structurally enforcing a monetary policy mandate with vastly diminished, if not complete exclusion of any reference to the aforementioned monetary imperatives.
Indeed, many of the socio-economic desirables alluded to by the public protector do warrant respectable consideration; little disparaging ridicule can be justified particularly in the context of real wage growth, equality, employment, and improved living conditions for broader demographics.
Unfortunately, as extreme end as numerous “financially technical” critics accuse the public protector of being — sitting on the condescending high horse that brands all forms of socio-economic rhetoric as “populism” — it is often the technically astute who miss the depth of progressive opportunity created by a report of such context, especially throughout Africa today.
Whether or not such discourse will be valued by our South African peers, time will tell, but in Zimbabwe omission can be negatively consequential.
Thus, customising the topic to Zimbabwe, at the beginning of the year, in an article titled “Is Dr Mangudya a bankers’ banker?” this writer shared similar critique of the Reserve Bank of Zimbabwe and its slow traction to enforce and execute mechanisms that directly result in socio-economic fruition for the broader population, mostly at what seems to be a preference for mechanisms that limit benefit to a favoured and increasingly profitable private banking sector.
Distinct from the South African public protector however, we should encourage our national stakeholders to converse in a moderate manner that finds the progressive middle ground where monetary imperatives which undeniably sustain a modern developed banking system as versed by financial technocrats, functions in coherence with socio-economic objectives versed by our legislative representatives. Granted, the two are not mutually exclusive and the intent is not to create two separate isles.
Financial technocrats should enter public discourse in a manner that informs of the intricacies that create best practice mandates of the Reserve Bank of Zimbabwe.
This information must start from international banking regulations and architecture that significantly influence the RBZ; after all our central bank is one of many and its existential being is a function of participation in a global system of banks.
Thus, a sound context for finding middle ground between a modern developed banking system and nationalist socio-economic desirables must empathise on the pressures exerted by global best practices on the RBZ.
For instance, the RBZ must participate within a network of international settlements, it must operate within transactional platforms that connect our local banks to global peers, and more significantly, the RBZ is subject to global banking legislation that confine it within benchmarked regulation, supervision, and risk management.
This appreciation is necessary when national legislators perceive the functional capabilities of their central bank, which logically influence the bank’s capacity to realise socio-economic desirables.
Now, it should be encouraged for national stakeholders with higher financial literacy to inform on these intricacies to a point which encourages progressive discourse. Unfortunately, members of our financial technocracy have typically been disparaging in their approach to socio-economic expectations that are not quite erudite or well versed on banking subject matter. In Zimbabwe too, we have allowed the intellectual condescension that brands socio-economic expectations as “populism”.
As such, we deprive ourselves off exploring very relevant contingency approaches that are not conventional international best practices; particularly in instances where punitive regulatory terms compromise our banking sector from satisfying socio-economic objectives.
Consider the elevated need for quasi activities and central bank credit support to infrastructural and social service activities. Consider the limitations that being on the Office of Foreign Assets Control (OFAC) have on monetary policy.
It results in international constraints that limit the generic potency of global best practices that may apply in a local banking sector.
There are inevitable socio-economic ramifications that come with these constraints which then create a warrant for non-conventional best practices to sustain socio-economic desirables.
For instance, consider the lack of credit creation pervasive throughout a shrinking national middle class. Due to falling corporate and private creditworthiness, there is undeniable need for the RBZ to explore mechanisms such “window guidance” which is a form of targeted lending channels for private banks and the insistence of the central bank.
This non-conventional practice was used after Second World War by the Japanese central bank which couldn’t sustain conforming to international best practices at the time, due to depressed socio-economic outlook.
Window guidance, however, requires a deliberate value chain approach which often increases the chances of systemic banking sector risk, a situation that further exposes a central bank to punitive global response.
Indeed then, by understanding the global pressures on the RBZ to abide by global best practices, financial technocrats should be able to empathise with the compromised socio-economic desirables pose to our population.
On the legislative end, granted that we have parliamentary committees on specialised subject matter, more and more legislators must have a deeper grasp of the structural design of our institutions such as the Reserve Bank and the global best practice demands of which they are subject to.
It is discouraging to read on poor attendance to parliament by our elected representatives, especially at a time of nation building when legislative intellectual nourishment is important.
How many of our elected representations consciously seek to develop understanding how our central bank works and the global environment’s implications on its capacity to satisfy electorate demands?
Comparatively, at a time when global banking is going through reforms such as Basel III, and more recent Brexit direction, UK legislators have met the challenge of increased diligence in understanding effective approaches to abiding to global best practices and sustaining socio-economic objectives.
At a parliamentarian hearing, last year, when asked how effective monetary policy can be to the socio-economic outcomes beholden to UK parliament, Bank of England governor Mark Carney responded: “Simulations using the bank’s main forecasting model suggest that monetary policy measures raised the level of GDP by around eight percent and lowered unemployment by four percentage points.
Without this action, real wages would have been eight percent lower, or around £2 000 per worker per year, and 1,5 million more people would have been out of work.”
The central banker’s response elucidates the merger between global banking best practices that retain monetary imperatives through a time of global reform to best practices, and the socio-economic objectives which emphasise employment and real wages.
Moreover, this was a response to questions raised by elected legislators whom seek their own financial literacy, as is the demand of being a representative incumbent.
Our legislators often leave economic matters to captains of industry, voluntarily pleading ignorance in some cases.
Furthermore, it has become popular rhetoric to supposedly leave politics out of economic issues. Perhaps the more precise rhetoric should suggest to leave the politics of partisanship and factionalism.
We must uphold engagement on socio-economic matters guided by the politics of representation; the kind of representation that sustains the principles of the republic that we are, and will continue to be for local socio-economic outcomes in a world of increased pressure on global best practices on our institutions.
