Finance minister Tito Mboweni stated categorically in parliament on Friday that the government would not proceed with the nationalisation of the SA Reserve Bank.
This is despite the governing ANC having adopted a resolution to this effect. The EFF is also pushing for nationalisation with its chief whip, Floyd Shivambu, having tabled a private member’s bill to achieve that, in parliament.
However, given the government’s parlous financial situation, mounting debt and a pandemic to master, this would hardly be the right time to embark on such a project. Nationalisation of the central bank would also give foreign investors the jitters.
In a written reply to a parliamentary question by DA MP Willem Aucamp, Mboweni said “the government does not intend to nationalise the SA Reserve Bank, as the costs to the fiscus in these challenging times would be considerable, after taking account of the need for compensation in terms of both section 25 of the constitution (relating to expropriation) and current bilateral investment treaties.”
The minister said this approach had been confirmed by President Cyril Ramaphosa in June 2019, when he stated that such nationalisation “will come at a cost, which given our current economic and fiscal situation, is simply not prudent.”
Mboweni noted that while 100% ownership of a central bank by the state is in line with most countries and jurisdictions across the world, “the timing of such nationalisation can generate more economic uncertainty about the future mandate and independence of the Reserve Bank, given investor concerns related to corruption, state capture and persistent low economic growth.
“The benefits of 100% ownership are also minimal, as private shareholders are currently restricted to playing a governance role only, and play no role in determining monetary, prudential regulatory or any other policy, as policy issues are the sole responsibility of the governor and deputy governors of the SA Reserve Bank, all of whom are appointed by the president.”
Mboweni said it was for these reasons that the government fundamentally objected to Shivambu’s private member’s bill, which proposed that the state be the sole shareholder of the Bank.
“From an investor and economic growth perspective, it is more fundamental for the SA Reserve Bank to continue to vigorously and independently pursue its constitutionally enshrined mandate of protecting the value of the currency in the interest of balanced and sustainable economic growth in the republic; and its additional objective of protecting and maintaining financial stability,” Mboweni concluded.
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