The nationalising of the South African Reserve Bank (SARB)is a hostile move in a long game of EFF political maneuvers to influence the mandate and operations of the Reserve Bank and ultimately South Africa’s banking system as a whole.
This is also an electoral game for the EFF. Whether or not the Bill is passed, the EFF hopes to dominate the ANC’s radical agenda, and position itself as the authentic party of the left.
In a statement released on the 6th of March 2018, the EFF is unreserved about its ambitious plans for the SARB, including: influencing prudential oversight, deconcentrating bank ownership, expediting the licensing of state owned banks, and using the SARB to create a preferential environment for certain banks including state-owned development finance institutions.
At present, private shareholders are limited to holding 10 000 shares and to electing a minority of the non-executive Board members. The provision of a fixed dividend means that shareholders do not invest with the motive of making profits. In addition, shareholders play no role in the formulation and implementation of monetary policy and are excluded from core functions.
There can be no meaningful public interest motive in nationalising the Reserve Bank, only the furtherance of private political interests.
Nationalisation will mean that Finance Minister will have the ability to appoint every board member from a list of nominees that are confirmed by a panel also largely appointed by the Minister. The conflict of interests doesn’t stop there; this Bill has to be interpreted in conjunction with the EFF’s Bank’s Amendment Bill enabling the state to own banks. Coupled with greater ministerial involvement in the Reserve Bank, this will give the government enhanced ability to influence the rules in a market in which it also competes.
As South Africa confronts the public losses due to state capture, another likely avenue for corruption should not be opened up.
Financial prudence and stability do not go in hand with the EFF’s tendency towards recklessness. The memorandum to the Bill is meant to provide detail about its financial implications. In the relevant section Julius Malema has indicated ‘none’. This Bill has recklessly been submitted without the necessary due diligence. The shares cannot just be written out of existence.
The EFF will need to propose a mechanism of expropriation, compensation and determination of the shares’ value. In addition, the potential impact on investor sentiment must be considered. The DA opposes threats to Reserve Bank independence and will ensure that the true costs of the Bill are tabled and debated.