Lesetja Kganyago says SOEs shouldn’t get bailouts
The Reserve Bank governor says the ability to say ‘no’ to bailouts is ‘enhanced by its independence’, despite calls for its nationalisation
State-owned enterprises (SOEs) in SA that have had billions of rand looted through state capture should not be bailed out by the central bank even as they pose a significant fiscal risk, Reserve Bank governor Lesetja Kganyago says.
“The challenge of dealing with too-big-to-fail SOEs, of combining cash injections with conditionality measures, needs to be dealt with by the elected authorities — as it has been in the latest budget from the National Treasury,” Kganyago said in an e-mailed copy of a speech on Tuesday.
The Bank’s “power to say no was greatly enhanced by its independence,” he said.
At least seven SOEs are “either on their knees or touching the carpet” as institutions were damaged due to state capture, public enterprises minister Pravin Gordhan said in February.
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As much as R500bn has probably left SA due to state capture, he said, as the government announces a record R69bn bailout for power utility Eskom to help it service its obligations.
Credit-ratings companies have singled out the central bank’s independence as a sign of institutional strength in the country. The ruling ANC wants to nationalise the Reserve Bank, one of the few worldwide that is owned by private investors.
President Cyril Ramaphosa says the move to bring it under the control of its citizens will affirm SA’s sovereignty.
“A small portion of leaders are bad, and if you understand probability, then you know sooner or later most countries will get a bad leader,” Kganyago said. “There is nothing undemocratic about buying some insurance against this eventuality, and independent central banks, like judiciaries, are useful parts of those insurance policies.”