SARB mandate secure with or without nationalisation, deputy governor says

Cape Town – South African Reserve Bank Deputy Governor Francois Groepe said on Wednesday evening that the bank's mandate was secure regardless of whether plans to nationalise it succeeded or not.

He was speaking in Cape Town during the Western Cape leg of SARB's monetary policy forum, which the bank conducts in every province every six months. 

Groepe’s remarks follow an ANC resolution at its December elective conference to buy shares in SARB with a view of transforming its mandate.

The ANC might have taken the resolution in December, but on the week that the party’s motion to nationalise the Reserve Bank was scheduled to be discussed, the ANC made an unexpected about-turn and withdrew the motion. However, the party has indicated its intention to re-table the motion.

However, these policy recommendations within the ANC have only found expression, largely, as a result of the party’s leadership trying to appease factions in its rank that have been vocal regarding their calls for “radical economic transformation”, with the Reserve Bank being one of many targets where such transformation is expected to emanate.

These calls seem to have been given impetus by Public Protector Busisiwe Mkhwebane’s finding of the apartheid era CEIX Absa loan in which she directed Parliament to amend the Constitution so that it changes the mandate of the Reserve Bank.

READ: Public Protector report on ABSA bailout set aside

Western Cape MEC for Finance Ivan Meyer was present at the forum and asked Groepe about the statements that have been made around the role of the Reserve Bank and whether this concerned the Monetary Policy Committee of the bank in any way.

“What do you say about calls to nationalise the central bank and MECs of finance who are eager to establish provincial state banks. For my part, You will be glad to know that that will not happen in the Western Cape as long as I can help it,” said Meyer.

Groepe gave the audience a lesson in central banks around the world, clarifying that while some were suspicious about the intentions of those who wanted the mandate of the Reserve Bank revisited, it was not uncommon to have privately owned central banks nationalised.

“There are only seven central banks with private shareholder, with us being one. The first issue is there are very credible nationalised central banks in the world. These are new phenomena, but many, including the Bank of England, only became a central bank in the late nineteenth century or more recently,” Groepe said.

Groepe said what is more important than whether or not the South African Reserve Bank is nationalised is to understand what proponents of the Reserve Bank’s nationalisation hope to achieve as far as transforming the bank is concerned.

• READ: Nationalising central bank would increase risk for SA -SARB

“Many central banks were in private hands and then nationalised. If we talk about nationalisation we are not going against international trends. But we don’t have a particular preference because the bank’s mandate is outlined in the Constitution so even if nationalised it will continue with its mandate as it always has,” he said.

He said as long as the South African Reserve Bank is capable of keeping the rate of inflation as low as possible, it should be able to maintain its core mandate. He said the bank got its mandate from the Constitution and the South African Reserve Bank Act as opposed to its shareholders.

“Our mandate already provides for growth and jobs because if you keep inflation low you can secure these ends. Currently the board has 15 directors and government appoints eight of them. They appoint the four executive directors and the four governors manage and have powers.

"A director can’t pitch up and ask us why we do what we do. They have no say, influence or authority on our policy,” said Groepe.

He further advised that shareholders get a R200 000 dividend regardless of how much profit the bank might make.

“While it is in private shareholding, the Act dictates that government gets the lion's share of what we have. So why does it make sense to nationalise it? It is important to ask yourself how nationalising the bank will change the way it functions. If you want to change how the bank operates, either change the Constitution or the SARB Act,” he said.