EDITORIAL: Heed Sim Tshabalala’s Reserve Bank warning
Some within the ANC have been bleating about ‘nationalising’ the Bank for years – a move they argue will boost the economy
Sim Tshabalala is, as you would expect from the CEO of Africa’s largest bank by assets, a man of scrupulously considered opinions, not known for making extravagant claims that have no merit.
So when he writes in Standard Bank’s annual report that "the integrity and independence" of the SA Reserve Bank must be defended, you know he’s not exaggerating the threat. Tshabalala flags the proposal to "nationalise" the Bank as even worse than the threat of prescribed assets — a policy in which the state forces institutions to put their money into projects chosen by the politicians.
Some within the ANC have been bleating about "nationalising" the Bank for years — a move they argue will boost the economy.
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It’s the ultimate red herring. The Bank has only 750 private shareholders, none of whom owns more than 10,000 shares. By law, the dividend is limited to 10c a share — a total of R200,000 a year paid on all the 2-million issued shares.
Tshabalala says: "The proposal to nationalise the Bank is more concerning than prescribed assets. The private shareholders have no influence over monetary policy nor over any aspect of the Bank’s operations. Nationalising [it] by buying out the private shareholders would cost a lot of money and serve no useful purpose."
At the same time, populist politicians have been lobbying to change the Bank’s mandate, away from ensuring a stable currency to some ill-defined goal of "promoting growth". The ANC, in its election manifesto, said the Bank "must pursue a flexible monetary policy regime … [which] must take into account other objectives such as employment creation and economic growth."
Tshabalala points out why this is a fallacy. "If politicians try to use monetary policy to expand spending in the hope that this will boost the economy onto a permanently higher growth path, the inevitable outcome is slower growth, more inflation, more unemployment and more poverty."
As he says, monetary policy does support growth by maintaining price stability, which supports investment and keeps up people’s after-inflation income — something that affects the poorest the most.
In truth, the tussle over the Bank is really being driven by a populist ANC faction that wants to "harness" the Bank for its own craven ends.
Last week, The Washington Post flagged this disturbing trend. While the newspaper said President Donald Trump was leading the global attack against central banks, others following his lead included Turkish President Recep Tayyip Erdogan — who changed the law so he could appoint central bankers; and Indian Prime Minister Narendra Modi — who axed every governor until he found a suitably pliable one. The result: India’s central bank has cut rates twice ahead of India’s election, while Turkey’s central bank spent $2bn to prop up its fragile currency ahead of elections.
"The assault on central banks will not have an immediate effect. But over time, their credibility will be eroded, their effectiveness will wane and then one day, when the next crisis hits, we will all wish we had institutions that could weather the storm. By then, it will be too late," the paper said.
In SA, the stakes are even higher. As governor Lesetja Kganyago said last week, the Bank has made it "more difficult" for people to pilfer state resources, "which is why the Bank was attacked".
"Independence ensured that the tremendous powers of a central bank — such as printing money, or licensing and supervising banks — couldn’t be taken over by politically connected individuals bent on looting the state," he said.
This is the context in which to read the call for "nationalisation". It is a contrived issue cynically meant to blind voters from asking why the ANC’s promises haven’t been met, while creating a fictional enemy to blame for the deflating economy.
This, of course, isn’t a new revelation. But what is new, and welcome, is that a CEO of the stature of Tshabalala has the cojones to stand up and tell powerful elements of the governing party that this won’t work. Others should follow his lead.