Three Ways to Redefine the Romance Between the Central Bank and Financial Markets in South Africa

In the past few years, a number of stakeholders have questioned the mandate of the South African Reserve Bank (SARB), the country’s central bank. Most notably, the Public Protector, some members of the ruling African National Congress (ANC) and the opposition party Economic Freedom Fighters (EFF), and even some (law) academics have called for the government to change the role or mandate of the SARB.

At the same time, these loud calls to transform national institutions should not surprise anyone living in South Africa because they derive much of their strength from the fact that – as a consequence of a brutal history of institutionalized and legislated inequality, discrimination and apartheid – the country posts one of the world’s widest income disparities. Still, changing the SARB’s mandate is not as simple as amending the law that provides for it; it requires challenging the neo-liberal economics that mostly informs that law. Changing the SARB’s mandate also invites policy makers to rethink the way the central bank closely relates to financial markets.

Accordingly, this article considers three possible ways to redefine the SARB’s legal relationship with financial markets. It examines insights from:

(1) Keynesianism,

(2) state-developmental-ism, and

(3) sustainable development.

It assesses these perspectives to determine which one could best replace the neoclassical economics behind the current SARB’s mandate. In the end, while the article does not settle on any of these alternatives, it puts forth a few pointers that policy makers could use in (re)fashioning a model for the SARB. The article argues that the calls for the transformation of the SARB’s role resonates in the South African context, but that the language of transformation and the legal approaches to this burning question have so far failed to indicate how this should be done in practice. The relationship between the SARB and financial markets powerfully illustrates the limits of these calls for transformation.