Nationalisation is a poisonous mix you can bank on
The Reserve Bank's independence is paramount, especially since it undermines the will of certain politicians
Politicians and banks make for a toxic mix anywhere in the world. That is one reason the independence of the Reserve Bank is paramount. It is also why the laws and regulations governing banks must ensure they operate to the highest global standards.
The “nationalisation” of the SA Reserve Bank has been put back on the agenda by the Economic Freedom Fighters, although it is not clear why. It tabled a bill last week that seeks to make the state the sole shareholder of the Bank and for its directors to be appointed by the finance minister, rather than by shareholders.
I doubt the EFF’s constituency care about whether the Reserve Bank has private shareholders or not, especially since the Bank functions according to statute, not according to shareholder whim. It does provide an avenue to embarrass the ANC, which adopted nationalisation of the Bank at its elective conference in December and has since done nothing about it. It also potentially creates a windfall for existing shareholders of the Bank who may demand a premium to be bought out.The Bank earned the ire of a faction of the ANC during the Guptas’ desperate fight to keep bank accounts open during 2016 and 2017. The Bank refused a pathetic attempt by the Guptas to buy Habib Overseas Bank in mid-2016. The Bank also stood in support of the commercial banks when they closed the Guptas’ bank accounts.
The Guptas’ brownshirts, Black First Land First, marched on the Bank’s Pretoria headquarters in February 2017, after a report from Public Protector Busisiwe Mkhwebane called for a constitutional amendment to the Bank’s mandate. The reasons were ludicrous, tied to the Absa lifeboat saga. That report has been solidly overturned by the courts, which have also ordered Mkhwebane to pay some of the costs personally.
When the dots are joined, it is clear that a wide campaign was mounted to attack the Bank on multiple fronts. The ANC’s resolution was surely a part of it.
We must also not quickly forget the pathetic scene in 2016 of then mining minister Mosebenzi Zwane announcing that the cabinet had approved an investigation into the banks for closing the Guptas’ accounts. That was quickly denied by the cabinet.
It is interesting that the terms of reference for the Zondo Commission into state capture include investigating whether politicians improperly intervened with banks over the closing of Gupta accounts.The EFF has not given much explanation of its move on the Bank. The ANC’s official reasons proffered for nationalisation make no sense, so can be dismissed as not the real ones.
The Reserve Bank is already under control of National Treasury, which appoints the majority of its board and all of the governors and deputy governors. Its functions are set out clearly in law, and private shareholders have no say on monetary policy or banking regulation. The only thing private shareholders gain is a seat at the table, providing an important level of transparency at the Bank.
Central banking requires a trust-based relationship with commercial banks to best protect the stability of the financial system. The role of private shareholders helps to protect that relationship.
Reserve Bank governor Lesetja Kganyago has publicly come out against nationalisation, noting also that it would be a needless expense to have to buy out shareholders.
Apparently there are some shareholders who are rather keen on nationalisation because it may offer them a windfall. Has the EFF formed a relationship with them, I wonder? Could it be a source of future campaign finance in the run-up to next year’s election?
All the EFF’s bill achieves is to undermine transparency and to compromise the independence of the Bank.
The toxicity of politics and banking has also been made clear from the VBS Mutual Bank mess.VBS was enabled by billions in deposits from municipalities. Those deposits, it appears so far, were motivated by “commissions” that were being paid to municipality representatives and middlemen, but also by instructions from senior ANC politicians.Limpopo ANC party provincial treasurer Danny Msiza and ANC Youth League secretary David Selan have been implicated by the EFF in directing municipalities to deposit their cash in VBS. The ANC also benefited from a R250,000 donation from VBS.
The Limpopo ANC has proposed a rescue plan for VBS, incorporating it into the Limpopo Development Board, though this has been thoroughly rejected by the national ANC and the Reserve Bank.The notorious R7.8m loan that VBS made to then president Zuma (which on its own may have been above board) added more political toxicity to the VBS story.The money lost by municipalities in VBS has undermined municipalities’ ability to deliver basic services, with some having lost a large chunk of their annual operating budgets. That too will have political consequences as voters in the regions hold their politicians accountable.
Were there some evidence that the private shareholding of the Bank has had some negative consequence, I’d be more willing to hear arguments for its nationalisation. But there is none. There is only evidence of how the independence of the central bank undermines the will of certain politicians. And when that will is self-serving, that is exactly how it should be.
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