Reserve Bank sniffs at ANC’s plan to nationalise it
Changing the ownership structure of the Bank ‘could raise the level of risk and uncertainty for [SA] in both a financial and economic policy sense’, the Bank says
The South African Reserve Bank rebuffed demands by the ANC for the state to nationalise the institution, arguing that it would be a damaging, costly and a “cosmetic” exercise, wasting money.
The ANC made the demand for the ownership of the Bank to be taken away from private owners at the end of its elective conference, where the presidency of the ANC was won by Cyril Ramaphosa. Ramaphosa is commonly seen as business friendly, while the organisation’s former president, Jacob Zuma, has overseen a faltering economy.
The ANC said the government it led must develop a proposal to ensure full public ownership in a way that “does not benefit private shareholder speculators”.
The Bank pointed out that its mandate was in no way influenced by private shareholders owning no more than 10,000 shares each of the 2-million in issue and which attracted dividend payments of R200,000 a year.
“The process of changing the ownership structure of the Bank at this point in time could raise the level of risk and uncertainty for the country in both a financial and economic policy sense,” the central bank said in a statement on Thursday.
“This heightened exposure to risk is unwarranted given the country’s fragile economic situation,” it said.
SA has been downgraded to subinvestment grade by ratings agencies Fitch and S&P Global, with Moody’s holding back, putting the country on a negative ratings watch. It has opted to wait until February, when the finance minister will deliver the budget.
“Nationalising the Bank would also be expensive as its shares currently trade for much less than the price at which some existing shareholders are willing to sell their shares,” the Reserve Bank said.
The South African Reserve Bank, in pursuit of its primary object, must perform its functions independently and without fear, favour or prejudice...
“The ‘buying-out’ of existing shareholders will therefore result in paying large sums of money to effect cosmetic changes that will have no bearing on the manner in which the Bank carries out its mandate or executes its policy responsibilities,” it said.
The is referred to in the Constitution and its mandate is clearly outlined, with its primary focus being the protection of the rand “in the interest of balanced and sustainable economic growth”.
“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 Constitution states.”
“The rights of the private shareholders are highly circumscribed,” the Bank said.
The Bank’s governor and deputy governors are appointed by the President.
The Constitution states: “The powers and functions of the South African Reserve Bank are those customarily exercised and performed by central banks, which powers and functions must be determined by an act of Parliament and must be exercised or performed subject to the conditions prescribed in terms of that act.”