EDITORIAL: Critics banking on false vision
Anyone expecting that the Bank would behave differently … is plain wrong
Opening the Reserve Bank’s 97th annual general meeting last week, governor Lesetja Kganyago noted rather wryly that the Bank had been in the spotlight for all the wrong reasons.
One of those is private shareholding in the Bank, which has come up as an issue yet again, as it tends to do every few years. This time, the ANC and two leading trade union federations joined the fray, as did Finance Minister Malusi Gigaba’s adviser Chris Malikane, all shouting loudly for the Bank to be nationalised in a move that prompted a sharp decline in the rand exchange rate.
The usually sensible head of the ANC’s economic transformation committee, Enoch Godongwana, led the charge, pointing to the "anomaly" of the Bank stock being held by private investors and proposing the Bank get rid of these – though not necessarily immediately.
True, the shareholding structure is an anomalous legacy going back 97 years to the founding of the Bank at a time when many central banks were private entities. As Kganyago pointed out, there are now only nine other central banks in the world that still have some form of private shareholding.
Arguably, then, there’s at least a theoretical case for the state to buy out those private shareholders and "nationalise" the Bank. The question though is why? And why now?
The Bank’s more militant critics simply seem to want it to be less independent – and to magic up some economic growth and jobs rather than focusing on fighting inflation as the Constitution mandates it to do (in the interests of balanced and sustainable growth).
For Godongwana, it seems to be more a matter of principle, "a sentimental thing" as he puts it, even if he concedes the state doesn’t have the money to do it. The money is a key issue at a time when SA’s public finances are so constrained.
Though the largest asset on the Bank’s balance sheet is the foreign reserves it holds on behalf of SA, it has made it clear that legally, these do not belong to the shareholders but to the country.
That means shareholders couldn’t hope for huge riches. But they would have to be paid out and the price could be relatively steep. That would mean taking millions — or more likely billions — of rand from the public purse to pay for a deal that would change nothing.
Being a shareholder in the Bank is nothing like being a shareholder in a private company. Shareholders have limited rights and, Kganyago emphasised, no role whatsoever in setting or influencing the Bank’s key mandates of monetary policy and financial stability. They are entitled to only a limited number of shares and minimal dividends, with 90% of the Bank’s profit going to the state.
They have no say over the Bank’s day-to-day management nor any claim on the foreign exchange reserves — nor do they even have the power to hire or fire the board. The only real powers they do have is to appoint the auditors and to select – from a vetted list — just less than half of the Bank’s directors.
The bottom line is that anyone expecting that the Bank would behave differently if it had the state as its sole shareholder is plain wrong. That is why it would simply be a waste of money to nationalise.
What’s worse is that while there is nothing wrong with proposing that SA’s central bank should be state owned, as are most other central banks, the timing of the attack raises all sorts of questions about the Bank’s independence, which SA cannot afford at a time when investors and ratings agencies are concerned about the integrity of the country’s key institutions. That’s why even if the governing party is sentimental about state ownership, it would do well to hold fire for the foreseeable future.