Nationalising Reserve Bank pointless, says Thabo Mbeki
Former president says the move would change nothing as it is government that drives policies
Former president Thabo Mbeki weighed in on the debate about the nationalisation of the Reserve Bank, saying such a move would be pointless.
The comments from the former leader, who the ANC forced out of office in 2008, are at odds with some in the governing party, including current leader Cyril Ramaphosa, who told parliament in March that doing away with the Bank’s private shareholders would give the country “sovereignty”.
But the intervention is likely to be welcomed by Bank governor Lesetja Kganyago, who has previously warned that election-driven “crazy ideas” about the Bank’s ownership and mandate would harm investor confidence, while buying out its shareholders would divert resources from key developmental needs.
“I really to this day do not know what anyone would gain by the nationalisation of the Reserve Bank, except to say” they had done it, Mbeki said during a visit to the ANC pavilion at the Rand Easter Show to pledge his support for the ANC ahead of the May 8 elections.
“Nothing would change in terms of the behaviour of the Reserve Bank, nothing.”
The Bank’s independence is at the heart of policy differences between the ANC faction aligned to former president Jacob Zuma and the grouping supporting Ramaphosa.
At the ANC’s 2017 Nasrec conference, the party resolved to nationalise the Bank, even though that would have no bearing on its mandate, which is enshrined in the constitution.
The issue came back to the fore in January when the governing party released an election manifesto saying the Bank should “pursue a flexible monetary policy regime”.
While the Bank should do this without “sacrificing price stability”, the ANC also said policy should focus on other objectives such as employment creation and growth.
Credit rating agencies have cited the Bank’s independence and the credibility of other institutions, such as the judiciary, as some of the country’s biggest strengths and warned that tampering with its autonomy would lead to downgrades, with disastrous consequences for the economy.
Moody’s Investors Service is the only one of the major ratings companies that has SA on investment grade.
Mbeki said on Tuesday he would need someone to sit down and explain to him exactly why the Bank should be nationalised. “I hear people saying the Reserve Bank must move away from this business of inflation targeting. Inflation targeting is not a decision of the Reserve Bank, it is a decision of the South African government.
“It is government that said there must be inflation targeting, and these are the targets between 3% and 6%.”
Mbeki questioned whether taking the Bank into public ownership would include “with compensation”, meaning the state would have to buy out the shareholders. Kganyago has said such a step could cost anything between R20m and R100bn, depending on which valuation was used.
“I don’t know where you are going to get the money from,” the former president said. The government would need to “divert money, which we need to build schools and clinics and so on, to buy out these shareholders. For what reason?”