There is this odd leftist narrative that nothing is going on in SA’s macroeconomic policy. Yet they moan that rates are too high and fiscal policy is too tight, which seems to be a bit of a contradiction.

In fact there is active macroeconomic policy going on, and policy that is about to shift up another gear.

The choice of macroeconomic policy really is about whether you want short- or long-term gain. No-one denies you could do quantitative easing, buy a load of infrastructure bonds and run a huge deficit with a huge ramp-up in social spending — all leading to an increase in growth in the year that it happened. The problem is what happens the next year, and the year after that.

Ah, but then you could trap money onshore with exchange controls. Yes, you could have more money chasing the same number of bonds being issued and yields might fall, but that’s not what people have in mind. They want more money chasing more bonds being issued to fund more spending. That would lead, at the very best, to the same debt service cost problems we now have, if not more and faster, as yields rose.

In reality it’s a small minority of people in the debate on macroeconomic policy who want this tail-chasing and use of magic money trees. In such conceptions, domestic investors never run for the hills but rather stay passively buying bonds. There is no flight to cash or gold or fixed assets as happens in emerging markets that try such a route.

Ah, but you could nationalise the SA Reserve Bank, and then it would do the “will of the people”. Julius Malema argued again in the Sunday Times for the nationalisation of the Bank along these grounds. It is common cause that the Bank’s ownership model is an outlier — the problem is the belief that if that changed there would be any change in how it operates.

Appeals to notions that the Reserve Bank is influenced by its shareholders show that those who advocate such arguments do not know its leadership, but also that they are simply Trumpian conspiracy-mongering.

The real reason — to say the quiet part out loud — is that some in this segment want the Bank nationalised to control financial sector policy and push down lending targets, loosen oversight of banks, state banks in particular, and to authorise new state banks with lower levels of regulation than international norms. This is all an obvious recipe for financial instability that if it properly detonated would affect the poorest the most.

But we go through this crazy cycle once every administration. Investors have now calmed themselves on the chances of any of this happening. The underlying problem is the belief that the Reserve Bank or the National Treasury can short-circuit wider problems that are holding back investment. Even if you want to force money into an asset class such as infrastructure, you still need projects into which investments can flow.

Many things can be done to make infrastructure investments easier, such as removing daily liquidity requirements and making it its own regulated class. It could also be socialised as an asset, which is what the previous inclusion of infrastructure as a separate line item in regulation 28 did. However, none of these things create the projects themselves.

We are seeing this in the Just Energy Transition Partnerships (JETP) where failure over the past three years has not been the lack of money but the lack of projects. It is the same in transmission: the National Transmission Company of SA’s lack of leadership on models to achieve scale by sticking with its engineering, procurement and construction model is preventing hundreds of billions of rand of public and private capital from investing in transmission.

We should be cautious of snake oil salesman on such issues, just as with exchange controls. The amount of offshore investment now sits some way below the (“new”) limits, thanks to the stronger rand. Indeed, the increased offshore share in the past few years since the limits were reformed was about half due to moves in the rand, not moves in actual money. Trying to close the door after the horse has bolted is a poor look for the credibility of the National Treasury and the Reserve Bank, and is not a step we see them taking.

But back to broader macroeconomic policy. The Treasury has slowly but surely shifted SA into a primary surplus and is taking a more active role in how it manages issuance, and so the yield curve. This is winning through a lower, flatter yield curve this year.

Serious issues remain with the composition of spending, for sure. We are seeing that play out in education now as previous cuts ratchet up. But a conservative macro-fiscal policy is a separate issue that can reduce debt service costs and provide more space in the budget as reforms boost growth for more spending sustainability in education and other priorities in the social wage.

The answer is not to blow up the fiscal framework and spook domestic, let alone foreign, investors. Instead, the cabinet must choose and prioritise. The National Treasury can guide this process, but ultimately the political choices are to be made by the cabinet.

The government of national unity (GNU) theoretically would be able to make such choices easier if it had an agreed programme of priorities between the parties in place. But that is not the case — there is still no such agreement. So the medium-term strategic framework is for now being written without the political direction of a coalition agreement. It is, therefore, difficult to see how the cabinet can take prioritisation decisions, and as such we stick with micro-fiscal problems within the context of macro-fiscal being “fine”.

A fiscal rule now being drafted can further reinforce the credibility of the macro-fiscal picture, and with it a flatter yield curve for the benefit of private, not just public, borrowers — as a public good. However, it obviously cannot force prioritisation decisions that are not happening. But again these are two separate issues. Credibility gains need to be taken where they arise, and a flatter yield curve can boost growth and so into revenues and more spending possible later.

The Bank is also eyeing a lower inflation target, and while not the same priority as the fiscal anchor for the National Treasury, the broad sense of the Reserve Bank managing expectations on long-run inflation lower — even if the target doesn’t move straight away — is an important one in supporting lower (nominal first then real in the long run) interest rates over time.

Indeed, if expectations management can do the heavy lifting, and administered prices can slowly come down, the path to a 3% target from 4.5% can be as smooth as the path from the previous 6% (implicit) target of the Bank down to 4.5%.

The central bank knows it cannot credibly achieve lower targets through aggressive rates hikes.

Through all this the point of macroeconomic policy change is to create space — for household balance sheets to function better at lower interest rates, for a lower and flatter yield curve to emerge that benefits all and not just the state — but with heavy lifting going on elsewhere (where it belongs — not in the National Treasury and the Reserve Bank) to reform network industries and remove blockages to growth and create project pipelines for capital to be invested productively rather than shoehorned.

• Peter Attard Montalto leads on political economy, markets and the just energy transition at Krutham, a SA research-led consulting company.