Economists warn against nationalising Reserve Bank
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Durban - ECONOMISTS have warned that the EFF’s proposal to nationalise the South African Reserve Bank (SARB) by allowing the state to expropriate privately owned shares without compensation would only lead to further opportunities for corruption.
EFF president Julius Malema initially proposed the Reserve Bank Amendment Bill in 2018.
The bill is currently before the parliamentary standing committee on finance.
EFF deputy president Floyd Shivambu presented the bill to members of the committee in August.
The committee has called for written public comments on the bill, which close at noon today.
The bill seeks to amend the South African Reserve Bank Act and proposes to make the state the bank’s sole shareholder.
The bank currently has hundreds of private shareholders, including current Finance Minister Tito Mboweni, the Anton Rupert Trust, Absa Bank and Discovery. Shareholder dividends are limited to ten cents per year.
In his presentation to the parliamentary committee, Shivambu said that, in its current form, the Reserve Bank Act allowed private individuals, including foreigners, to own shares, giving them “some role to play in the governance of the South African Reserve Bank, including the election of the directors, and to receive dividends from the bank’s profits”.
According to the amendment bill, the minister of finance would have the power to make regulations regarding the appointment of directors, and it would allow him to appoint its auditors.
Shivambu suggested that the shares should be expropriated without compensation “in the public interest”, a matter that Parliament’s legal team raised in its legal opinion, which ordinarily accompanies private bills.
“We are of the opinion that the bill may not pass constitutional muster if it is passed as is, as the proposed expropriation of the shares does not allow any discretion for the consideration of compensation, which is contrary to what section 25 of the Constitution requires,” Zuraya Adhikarie, the chief parliamentary legal adviser, wrote in the team’s submission.
University of the Witwatersrand economist Lumkile Mondi warned against nationalising the bank, saying he was concerned about “corruption and mismanagement”.
“In South Africa, given what we know about the dominance of interest groups who put their hands into the till, it raises alarms with what is happening at the Zondo Commission. We would like the Reserve Bank to remain as it is,” he said.
“I don’t think the state is able to manage the resources of an institution, as seen with Transnet and Eskom. They must leave the bank alone. If they want to change the mandate of the bank that can be done through a parliamentary process, but nationalisation is really a flashing danger sign,” he said.
Economist Mike Schussler said nationalising the bank would not do any good for the country, and it would not necessarily change monetary policy.
“It’s going to create the wrong impression – that the government is trying to control things, although they may not be trying to, but that is the way perceptions run,” he said.
“It’s been one of the strongly defended institutions in South Africa and it has helped us as a country more than most realise. Even as our judiciary and the auditor-general is independent, the shareholders have no say over monetary policy, which is important to realise. Why change our institutions that are successful?”
PwC economist Christie Viljoen said the SARB was “one of very few” central banks that were still privately owned.
“In a global context we’re an exception. The key factor when it comes to central banking dependence is not necessarily ownership, but the mandate that it has. The effectiveness of the Reserve Bank depends on its mandate and its ability to roll out its mandate,” he said.
He said the government already “strongly influenced” the bank’s mandate via the National Treasury.
DearSouthAfrica founder Rob Hutchinson said the bill would probably be rejected but the EFF had wanted to use it to drive the issue of expropriation without compensation using section 25 of the Constitution.
Political analyst Ralph Mathekga said the issue of nationalising the bank had created division within the ANC.
“The EFF has snuck in expropriation without compensation. This will bring a test to the ANC as to who will prevail. There are those within the ANC who want this, and those who don’t,” he said.
The SARB referred questions to the National Treasury, which declined to comment.
DA MP and spokesperson on finance Geordin Hill-Lewis said his party was opposed to the bill.
“We outrightly reject it and don’t see it going anywhere. It’s just a stunt of the EFF to drive the nationalisation of the Reserve Bank,” he said.