JOHANNESBURG - The proposed nationalisation of South Africa's central bank would cut out private shareholders whose involvement helps ensure greater openness and provides transparency to the operations and auditing of the institution, think tank Free Market Foundation (FMF) said on Wednesday.
Both the governing African National Congress and the opposition Economic Freedom Fighters have called for full state ownership of the South African Reserve Bank, which unlike most global central banks in the world has been privately owned since its inception in 1921.
The ANC resolved at its national conference in December that the SARB should be 100 percent state-owned and EFF leader Julius Malema recently released a draft bill on nationalising the bank.
On Wednesday the FMF noted that the Reserve Bank was a statutory creation of parliament, which also determined the main policy goals that the bank was tasked to fulfil. Also, it said, more than half of the bank's directors, including all the executive directors, were appointed by the president in consultation with the finance minister and a government appointed panel.
"The private shareholders have no direct control over any aspect of monetary policy or Reserve Bank operations," said FMF publications editor Richard Grant, a professor of finance and economics at Cumberland University.
"Their only role is in the election of a minority of board members from a pre-approved list. This involvement is valuable to the extent that it requires greater openness and provides transparency to the operations and auditing of the bank," he said.
"Successive amendments to the South African Reserve Bank Act have weakened this role and, with the proposed transfer of all shareholdings to the government, it would be lost completely."
He said despite its corporate structure with ostensibly private shareholding, control of the SARB had always resided in governmentally appointed officers and the politicians who appointed and that the government was also the residual claimant on profits.
Nationalisation would not necessarily mean any change in policy or in the control mechanisms but the marginal loss of transparency could, over time, increase the risk of more aggressive or more politically sensitive policy interventions.
"The greatest risk comes from the underlying motivation within parliament to nationalise the Reserve Bank and how that motivation would be reflected in the enactment of changes to its mission or structure," Grant said.
The EFF says the current ownership structure has resulted in foreign private shareholders with no patriotic interests and commitment to South Africa having a stake in the bank.