The African National Congress (ANC) recently decided that the South African Reserve Bank (SARB) should be nationalized. Their reason for this was simply because it is not normal for a central bank to be privately owned. Considering the high cost of buying out shareholders and the fact that there are more pressing matters we should be concerned about at the moment, I don’t think theirs is a good enough reason.
If you may recall sometime last year, the Public Protector Busisiwe Mkhwebane recommended that the mandate of the SARB in the constitution be amended to focus on promoting sustainable economic growth instead of price stability.
She stated that section 224 of the constitution should read as follows: –
“The primary objective of the South Africa reserve bank is to promote balanced and sustainable economic growth in the republic while ensuring that the socio-economic well being of the citizens are protected”
She also added that there must be regular consultation between the bank and parliament. Fortunately, she later lost that battle in court. However now that the ANC has decided to nationalize the bank instead, they are insisting that they will not change its mandate. So the only thing that would change is the ownership.
Even though the reserve bank is privately owned, shareholders have no say over monitory policy decisions. They are limited to 10 000 shares per individual/company out of the 2 million shares available. This is done so that individual entities don’t end up influencing the bank’s decisions due to their majority shareholding. The governor of the reserve bank, Lesetja Kganyago (who by the way is a great leader), and three deputy governors are appointed by the president himself. The bank is currently a well-run organization, it is not in need of any remedial action. Therefore nationalizing it right now is extremely unnecessary. If we were to go with what the ANC is telling us, which is that they will not change anything, then what is the point? Why are we even discussing this, surely the ANC has better things to worry about e.g. unemployment.
So with all that said, I get the feeling that there is a little more to it. I would like to believe what they are telling us but it seems like they have a hidden agenda.
Amongst other things, the role of the reserve bank is to supervise our banking systems and issue banknotes and coins. The government wants power over that. It’s normal for a central bank to be state-owned, but considering the corruption allegations against our government and obviously let us not forget the dire state of SOE’s, I don’t trust them.