EDITORIAL: Why nationalising the Reserve Bank means everything and nothing
Deep significance of a futile gesture
Business leaders understand that the ANC policy conference’s resolution to “nationalise” the Reserve Bank — buying out its private shareholders — is the equivalent of handing your car keys to a toddler having a tantrum. You know there’s no way it’ll make a difference, since he can’t drive. But at least the yelling will cease for a bit while he struggles to remember why he so desperately wanted the keys in the first place.
Nationalising the Bank is the mother of all meaningless gestures: the economic dunces in the ruling party might be slow to grasp it, but the Bank’s shareholders have exactly zero bearing on its behaviour or monetary policy decisions. They don’t “own” the bank and its independence is enshrined in the constitution.
But, you might argue, if the move to nationalise the Bank is so meaningless, why did the rand fall by 2% after the news broke?
The short answer, of course, is fear — fear that the country’s economic policy is at risk of becoming a toy in the hands of a fiscally clueless but interventionist faction of the ruling party, aligned to wrecker-in-chief, President Jacob Zuma. The fear is that while nationalising the Reserve Bank is an empty gesture, who knows what other, less benign interventions may happen down the line to appease populist whims?
With treasury compromised, the Bank is pretty much the last remaining institutional pillar upon which SA’s credit rating and investment case is now leaning. But for some in the ruling party to declare open season on the Bank suggests the protection it has enjoyed is diminishing.
This means a wider contestation about the Bank’s “mandate” is likely to grow. What wilder flights of fancy await it when the economy fails to grow or transform in the way some factions might want? Would the ANC agree to alter the Bank’s mandate to target growth instead of inflation, as lumbering public protector Busisiwe Mkhwebane wants? And what happens when that fails to miraculously restore growth? Is the solution to replace the Bank’s leaders with individuals who are more receptive to printing more money to settle SA’s ever-escalating debt pile?
In short, the markets balked at the plan to “nationalise” the Bank because it implied that economic policy making is in the hands of a mob with a collective case of attention deficit disorder.
Frighteningly, it could have been even worse. Strident voices aligned to Zuma also called for the scrapping of the Public Finance Management Act and the Financial Intelligence Centre Act — two key pieces of legislation that combat the looting of public funds.
This faction wanted the Bank nationalised, the mining charter endorsed, land expropriation without compensation agreed to, and a big push against “white monopoly capital”. Of these, only the first was adopted — not because it makes economic sense, but because it was a way to break the standoff between the Zuma and Cyril Ramaphosa factions.
As the battle within the ANC intensifies ahead of December’s elections, the Bank can expect to be tossed on the tempest. Its fate will act as a barometer for which faction is holding sway.
Former deputy finance minister Mcebisi Jonas put it best when he said: “Many institutions have been forsaken or deliberately weakened for political expediency, and state transformation has become so politicised that we would be forgiven for thinking that economics is all about political power.”
The Bank, though deeply shaken, will not be stirred from its mission. It has the constitution and the judiciary at its back and the support of all sensible South Africans.
Let’s hope that’s enough.