CAPE TOWN – President Cyril Ramaphosa announced in Parliament yesterday that South Africa was going to move ahead with the nationalisation of the South African Reserve Bank (Sarb).

The rand immediately weakened, giving up earlier gains as a consequence, and was trading at R14.34 to the US dollar at around 3.30pm.

Peregrine Treasury Solutions corporate treasury manager Bianca Botes said the markets were perceiving this as undermining the Sarb’s independence which was largely negative for the local currency. 

“The full extent and nature of President Ramaphosa’s announcement will need to be analysed extensively to determine if the government will have authority over the mandate of the Sarb. “The rand is demonstrating severe volatility and further potential depreciation is possible. “The next important trading barrier for the rand will be at the R14.50/$ level,” said Botes.

At 5pm, the domestic currency was bid at R14.38 to the greenback, 17c weaker than Wednesday’s 5pm bid.

The chief economist of Rebalance Fund Managers Dr Chris Harmse said that as long as the Sarb remained independent as was written in the Constitution, it would not have any effect on either monetary policy or its relationship with the Department of Finance.

“The mandate of the Sarb is anyway set by the minister of finance and private shareholders have no say in that. It seems only a symbolic move by the ANC at best.

“If the government changes the Sarb mandate away from protecting the domestic value of the rand, namely keeping the inflation rate within the targets, then rating agencies will downgrade us further and the rand will be under severe stress with huge risks for growth and jobs,” said Harmse.

Ramaphosa told a Parliamentary question-and-answer session that Sarb should be owned by the people.

He said that nationalising central banks was nothing new, and that similar steps had been taken by a number of other countries.

South Africa was one of only six countries that still had external shareholders in their central bank, he said.