EDITORIAL: Reserve Bank at centre of political divisions
Finance minister Tito Mboweni — who was the eighth governor of the Bank — has rightly warned against politicising the Bank. His comrades have not been listening.
The response to the ANC’s manifesto has been somewhat muted given the inclusion of some contentious clauses, including one on the mandate of the Reserve Bank.
The future and role of the Bank has in recent years gotten caught up in the fights within the ANC, culminating in the 2017 resolution to push for its nationalisation, allegedly at the insistence of the faction linked to former president Jacob Zuma, as part of their radical economic transformation rhetoric. Whether they had any appreciation of the workings of the Bank, or the fact that the shareholding has no bearing on monetary policy, is unclear.
What is clear now is that the Bank is at the centre of the battle between factions in the governing party. Finance minister Tito Mboweni — who was the eighth governor of the Bank — has rightly warned against politicising the Bank. His comrades have not been listening.
Both Mboweni and President Cyril Ramaphosa on Wednesday gave assurances that the independence of the central bank was non-negotiable, with the former noting that in countries where central banks had full autonomy, the economic outcomes tended to be superior.
ANC secretary-general Ace Magashule gave his own assurance in an interview with eNCA on Sunday that the Bank would be nationalised within the next five years. Ownership is not key to the operation of central banks, so in most cases it is irrelevant whether they are owned by the state or private shareholders.
The US Federal Reserve has both elements, while the European Central Bank is owned by the central banks of the countries that make the euro area. They are equally independent, although President Donald Trump’s attacks on the Fed have raised concerns that the independence of the Fed could be undermined, even if just in the eyes of the public.
So the ANC resolution on the ownership of the Bank could be seen as harmless. But in the context of the current political fights and the recent track record of political interference in critical state institutions, it could have serious and dangerous consequences.
There are currently just over 600 shareholders in the Bank, according to its website, and no individual shareholder can hold more than 10,000 shares. Dividend payments are no more than 10c a share. And 90% of the Bank’s earnings after expenses are handed to the Treasury, according to Mboweni.
Those shareholders have no say in policy, and the constitution clearly states that the Bank has to consult regularly with the finance minister. The Bank is also accountable to parliament, submits its annual reports there and reports to the finance committee from time to time.
So it’s unclear what changing its ownership would change in relation to its functioning and accountability.
And then there was the release of the ANC manifesto over the weekend, which stated that the Bank needs to take into account economic policy and employment when setting monetary policy.
The SA Communist Party, predictably, raged against “neo-liberals and conservatives” who expressed a degree of alarm, even though the ANC stopped short of asking for a change in the mandate and emphasised that the Bank should not compromise on its primary objective of seeking price stability.
Of course there is good reason to be concerned. While it has become clear that the ownership debate has been a red herring, could the ANC have turned its focus to the Bank’s mandate, which can only be done through a constitutional mandate?
This sounds unlikely. For one thing, the fraught land reform debate should prompt them to desist. If the party was intent on interfering with the Bank and directing policy, there are much easier ways, such as the appointment of a governor who might be more receptive to “suggestions” from the government.
Nevertheless, the political noise around the Bank is disturbing. It brings back memories of the events that led to the attack and eventual destruction of the SA Revenue Service.
As the country continues its recovery after facing the abyss during the Zuma period, it would be a tragedy if we are seeing the start of an attack of one of the institutions that held the ground and made sure we emerged on the other side with something to build on.