CLAIRE BISSEKER: Reserve Bank’s Phala Phala call is not like Primrose prime

The Primrose prime incident was a low point for the SA Reserve Bank. It took place in November 1984, when the Bank cut the policy rate just before the Primrose by-election, which the National Party feared losing.

At the time, the prime overdraft rate was at a record high of 25%. Two months after the by-election, which the National Party won, the Bank raised rates back to their previous levels. At the time, the Financial Mail said the Bank’s “obvious political manoeuvre has all the signs of a quick fix” despite the denials of the then governor, Gerhard de Kock, that he acted on instruction from former president PW Botha.

The fact that De Kock was up for reappointment as governor the following year made the optics even worse. The incident placed a question mark over the independence of the Bank and its ability to conduct monetary policy in the best interests of the country.

It would be a stretch to suggest that there are strong parallels between the craven opportunism of the Primrose prime incident and the Bank’s performative finding last week that President Cyril Ramaphosa didn’t breach foreign exchange regulations in the Phala Phala matter. But the media has not looked favourably on the Bank’s actions, with the Daily Maverick calling it “a buffalo-sized cop-out” and the Financial Mail suggesting that the Bank’s “halo has slipped”.

The facts are that Ramaphosa’s Phala Phala farming business took possession of $580,000 in cash from Sudanese business person Hazim Mustafa in 2019, ostensibly in exchange for some buffalo. Mustafa has still not taken delivery of the game three years later, and the president’s staff hid the dollars in a sofa until it was stolen in a burglary. The forex was not declared to the Bank within 30 days as prescribed by law.

The Bank has reasoned that because the transaction between Ramaphosa or his farm and Mustafa was never completed, since the buffalo never changed hands, this meant that neither Ramaphosa nor his farm were legally entitled to the dollars. And only people who are entitled to foreign currency from a sale have to declare it within 30 days.

I don’t for a minute believe that the Bank acted at the behest of the president for any reason, including preferment, even though the optics are not good. Coincidentally, four out of five members of the Bank’s monetary policy committee will soon be up for reappointment by the president: governor Lesetja Kganyago (in November 2024), Kuben Naidoo (April 2025) and Fundi Tshazibana and Rashad Cassim (both in August 2024).

Fortunately, the Bank’s reputation for fiercely protecting its independence, its hard-won credibility and high international standing should put paid to conspiracy theorists who would like to join the dots in that way. SA can be grateful that Kganyago is made of far sterner stuff than De Kock, and he certainly doesn’t need to worry about being reappointed. He is probably fighting off offers from the World Bank and IMF, which would consider themselves lucky to have him.

So why then did the Bank let the president slip through a neat little technical loophole? Why did it risk its hallowed apolitical reputation in this way? Perhaps the Bank was just following the letter of the law, but I think it did it for the beleaguered SA economy and hard-pressed consumer, neither of which is in any state to cope with another huge shock. Just imagine the disorderly fallout — for the rand, for inflation, for interest rates — should the president have been forced to resign abruptly over the inanity of a forex violation?

This may not satisfy the purists, but it does at least make the Bank’s conduct understandable — after all, its remit is to act in the best interests of the economy. Ramaphosa just got lucky. He should take the win with utter humility.

• Bisseker is a Financial Mail assistant editor.