NATIONALISATION
GAVIN KEETON: Reserve Bank grab will not achieve critics’ aims
In recent weeks, there have been calls to nationalise the South African Reserve Bank and cancel its constitutional mandate to defend the value of the currency and promote growth. Such calls seem motivated by the belief that this will lead to lower interest rates. In fact, neither move would change the way interest rates are currently set. But they could severely damage the credibility of the Reserve Bank itself and the way it conducts monetary policy.
Calls to nationalise the Bank reflect the view that this would increase the government’s control over monetary policy. Critics mistakenly conclude that the Bank’s independence in deciding when to change interest rates means the government has no influence over monetary policy. The fact that the Reserve Bank has private shareholders is unusual. This structure was presumably motivated by a desire in 1921 to raise funds to capitalise the Bank. It in no way diminishes the government’s influence over the management. As in many countries, the president appoints the governor and deputy governors.Private shareholders elect half the members of the Reserve Bank board. The president appoints the other half, and the governor has the casting vote. As with any company, the board oversees governance of the Bank but plays no part in shaping monetary policy. Interest rates are set by the Bank’s monetary policy committee (MPC), which is made up of the governor, the three deputy governors and two seni...
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