South African President defends moves to nationalise central bank

Posted by News Express | 8 March 2019 | 728 times

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•South Africa’s President Ramaphosa

President Cyril Ramaphosa says there is nothing sinister about the push to change the ownership of the   Reserve Bank.

Responding to questions in the National Assembly on Thursday, Ramaphosa said the governing ANC had taken a “clear resolution that the Bank should be owned by the people of SA”.

His statement in parliament is in sharp contrast to recent comments made by Reserve Bank governor Lesetja Kganyago.

Kganyago insisted that the Bank remains independent even with private shareholding,arguing that nationalising the central bank would be too risky for the economy.

 He said the bank would protect its mandate and independence, which are guaranteed by the constitution, should there be any moves to pass legislation to nationalise it.

Credit rating agencies have also warned SA not to  tamper with the independence of the central bank, saying it could lead to ratings downgrades.

The DA said it would fight against the adoption of a bill by parliament aimed at nationalising the Bank. The party says nationalisation is a threat to the central bank’s independence.

In 2018, then finance minister Nhlanhla Nene persuaded the ANC in parliament to drop a scheduled motion on the nationalisation of the central bank at the 11th hour, arguing that the debate would unsettle the markets at a time when a delegation from Moody’s Investors Service was conducting an in-country visit.

At the time, Moody’s gave SA a reprieve, maintaining its Baa3 rating, one notch above junk status, with a stable outlook. The credit-ratings agency cited the change in political leadership and the recovery of the country’s institutions among its reasons for keeping SA at investment grade.

 A downgrade would have meant all three major ratings agencies had SA’s foreign currency and rand-denominated debt at sub-investment grade. This would have triggered the country’s expulsion from the Citi World Government Bond Index and projected capital outflows of more than R100bn.

 

The ANC and the EFF have called for full state ownership of the Bank which, unlike most central banks in the world, has been privately-owned since its inception in 1921.

“We have a situation where we have external shareholders. This [changing ownership] has been done by a number of countries around the world. There are some six countries in the world that have external shareholders in the bank, and we are one of them,” said Ramaphosa.

The president said changing the central bank’s ownership would not necessarily affect the independence of the Bank.

Ramaphosa gave the UK as an example, saying the government ownership had not affected the central bank’s commitment to keep inflation under control.

“What this [doing away with private shareholders] will do is give us sovereignty. A central bank is one of the most important institutions in the life of any country. That decision [to change ownership] is there and it has to be implemented. That is the position and there is no hidden agenda,” said Ramaphosa.

“The Reserve Bank should be owned by the people of SA, not external shareholders,” he said.

The Reserve Bank and seven other central banks — Belgium, Greece, Italy, Japan, Switzerland, Turkey and US — have shareholders other than their countries’ governments.  The Bank has  about 650 shareholders. 

Responding to another question from DA leader Mmusi Maimane, Ramaphosa said the drive to expropriate land without compensation was not an attack on investors.

“We will not expropriate investments. We cannot invite people to invest in our country then say we will expropriate what you invest. However, there is land that was stolen from the people of our country and there is land hunger out there.

“There is historical injustice which needs to be addressed. The question is how and when will we do it. That is what we are working on through the constitutional amendment. We will do everything within the rule of law,” the president said.(Businessday SA)

 


Source: News Express

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