NEWS
30/05/2018 07:33 SAST | Updated 30/05/2018 07:34 SAST

ANC Moving Ahead With Reserve Bank Nationalisation... But It Is Moving With Caution

The ANC says it will consult widely on nationalising the Reserve Bank.

South African Reserve Bank Governor Lesetja Kganyago.
Yuri Gripas / Reuters
South African Reserve Bank Governor Lesetja Kganyago.

The ANC is pushing ahead with plans to nationalise the Reserve Bank, but appears to be moving cautiously. According to Business Day, the party says it intends to consult widely before making any concrete moves in that direction.

On Tuesday, ANC secretary general Ace Magashule told reporters that the party had directed its sub-committee on economic transformation to urgently concentrate on the nationalisation of the Reserve Bank, according to News24. He reportedly said this was a resolution of the party's December conference which could not be ignored.

"It's a resolution of conference. It has to be implemented. It has to be implemented with sensitivity, in consultation and engagement with various stakeholders and shareholders," he reportedly said.

But he reportedly said the party wanted to "act responsibly" and "give ourselves time".

According to Business Day, the party seems to be moving with caution after tabling a motion in Parliament to nationalise the Reserve Bank and then withdrawing it at the request of finance minister Nhlanhla Nene.

There is also reportedly confusion in the party over the difference between the Bank's ownership and its mandate. Constitutionally, the Bank is reportedly independent from government and its private shareholders have no say in monetary policy.

In March, the ANC withdrew its motion just before it was due to be debated in Parliament. Fin24 reported that it said it would re-table the motion "which will be fully aligned with the outcomes of its 54th national conference on the Reserve Bank". The ANC reportedly said the motion would guarantee the independence of the Bank while correcting the "historical anomaly of the bank having private shareholders".

The Sunday Times reported that it was Nene who stopped the motion from being tabled at the ninth hour. This was reportedly because ratings agency Moody's was in the country that week and Nene was concerned that the debate could lead to another downgrade.

An MP reportedly said, "Nhlanhla told us the timing was not good because Moody's is in the country. He also advised that caucus should first conduct an assessment of the best international practices on the ownership of central banks so that the motion is better informed, to avoid sending a wrong message to the money market."

The have been calls for the bank to be nationalised from as far back as 2010, when it was mooted by then ANC secretary general Gwede Mantashe. At the time, Mantashe reportedly said the Bank was one of only five central banks in the world still "in private hands".

But constitutional law expert Professor Pierre de Vos wrote at the time that the Bank enjoys Constitutional protection from government interference, and changing its shareholding structure would not change this at all, unless the Constitution is amended to abolish its independence.

"The SARB Act can be amended without any constitutional problem to abolish private shareholding in the Reserve Bank – as long as those shareholders are adequately compensated. But, once again, this will make no difference to how the Bank operates as its independence is constitutionally guaranteed. The "debate" about the nationalisation of the Reserve Bank is therefore a red herring to hide disagreement in the ANC about more fundamental economic questions within the ANC alliance," De Vos wrote.

In March 2017, Associate Professor at the Wits School of Economic and Businesses science Chris Malikane told Fin24 that the bank should be nationalised.

"[The truth is] the money that is in our pockets, the money through which our labour is valued, is printed by a private institution ... that is a fundamental contradiction," he reportedly said, adding that a number of issues such as price fixing of the currency were "happening under the watch of the central bank".

Malikane was appointed as economic advisor to then-finance minister Malusi Gigaba in April 2017.

But in December, shortly after the ANC's conference, the Reserve Bank said attempts to nationalise it would be "cosmetic" and "costly". According to Business Day, at the time, the bank said, "This heightened exposure to risk is unwarranted given the country's fragile economic situation."

In July 2017, Reserve Bank governor Lesetja Kganyago reportedly explained:

"..shareholders in the SARB have very limited rights; have no role whatsoever in the setting of, or influencing, the key mandates of the SARB, i.e. monetary policy and financial stability policy; have no sway over the day-to-day management of the SARB; are restricted to a maximum of 10,000 shares per shareholder out of 2-million issued shares (including those of their associates); receive a fixed return on their shares of 10 cents per share from profits made (this amounts to an overall divided payment by the SARB of R200,000 per year).

"In fact, 90% of the SARB's profits are transferred to government, and the remaining 10% is allocated to the SARB's reserves. Shareholders do not have any claim on the foreign exchange reserves of the SARB; and are unable, by means of a resolution or otherwise, to amend or change the SARB's affairs by deviating from the prescriptions of the SARB Act."

Addressing reporters last week, President Cyril Ramaphosa said the bank's independence should remain, News24 reported.

"I was one of those who participated in the crafting of the clause that deals with the Reserve Bank in our Constitution and can confirm and testify that to me, that remains an unassailable provision in our Constitution," Ramaphosa said.