Simnikiwe Hlatshaneni Basa CEO Cass Coovadia said Ramaphosa was talking two months before the election when he told parliament the ANC wants the bank owned by citizens. The Banking Association of South Africa (Basa) has poured cold water over the excitement surrounding President Cyril Ramaphosa’s statements in parliament, ostensibly underpinning the call to nationalise the South African Reserve Bank. Addressing parliament during his last pre-election question and answer session yesterday, Ramaphosa sought to clarify the ANC’s position on the proposed nationalisation of the bank, making an example of the nationalised Bank of England in the UK. “As the governing party, we have taken a very clear resolution. The Reserve Bank of our country should be owned by the people of South Africa. That is an important consideration. “What we do have is a situation where we have external shareholders … who live in various countries and work in various countries and so forth,” he said. Basa CEO Cass Coovadia said he was reluctant to comment on whether Ramaphosa was simply referring to external shareholding or actual nationalisation in which the state fully owned the bank. He cautioned that the president was making these statements two months before the election. “I think we have to certainly accept that we are in a pre-election period and there will be some rhetoric, and so we accept that within that context. To us the most crucial thing is that the independence of the bank is protected,” he said. He added that the issue of shareholding in the context of the independence of South Africa’s central bank was made moot by the constitution. “In many ways, the focus on the ownership of the bank is a red herring – we would prefer the status quo to remain where there are private shareholders who have no say over the governance of the bank,” he said. Ramaphosa’s comments on the Reserve Bank were met with a roar of cheers and heckling, as he explained that the governing party’s stance on central bank ownership was not a new concept. “What I propose has been done in numerous countries. There are only about six countries in the world which have external shareholding in central banks, and we are one of them,” said Ramaphosa. For more news your way, download The Citizen’s app for iOS and Android.<doc-sep>President Cyril Ramaphosa delivered a major blow to the rand this week after making it explicitly clear that the ANC, and thus government, will move ahead with its goal to nationalise the South African Reserve Bank. Ramaphosa’s line in Parliament on Thursday (7 March) – in which he said that ANC had made its position clear at its policy conference, that the SARB should be nationalised – stood in stark contrast to the message he delivered to investors at the World Economic Forum in Davos at the start of the year, where he said that the independence of the SARB was sacrosanct. According to Ramaphosa, there is nothing sinister or revolutionary about the ANC’s intent to nationalise the central bank. The president told MPs that most countries around the world have done so, and in fact South Africa stood in a minority – one of six countries – to have the bank independent and owned by non-state shareholders. The move to nationalise the Reserve Bank is not new, and the president previously downplayed the impact of the move, saying that the governing party only wants to align the goals of the SARB with the government’s objectives, such as employment creation and economic growth. This must be achieved “without sacrificing stability,” the president said at the time. “The governing party is essentially saying we have got a burning platform with regard to employment, and we would like everyone to focus on the creation of jobs. Clearly there is nothing wrong with that.” However, economists, analysts, ratings agencies and investors read the move as a big step towards one thing: interference with the SARB’s mandate. According to Intellidex analyst, Peter Attard Montalto, it’s this threat of interference which is ringing alarm bells, and which sent the rand crashing to its weakest point since the start of the year. “The issue here is not nationalisation itself – but nationalisation as a strategic stepping stone towards mandate change and greater political interference in the SARB at a time of (possible) management changes to come,” he said in a note. When the SARB’s independence was threatened in 2017, the campaign was pushed by a faction within the ANC led by president Jacob Zuma’s supporters – at a time that the bank was seen as a blockage to various political goals. Read: Why the Reserve Bank’s independence is being threatened now Despite the apparent changes to the ANC’s leadership at the end of 2017 and in 2018, these factions within the party have not dissipated – and the goals remain the same. “The ultimately political aim here is not only looser monetary policy from the left, but from the corrupt elements of the ANC, a desire for control of the Prudential Authority and financial sector regulation,” Attard Montalto said. “Progressing with nationalisation rather than drawing a (red) line in the sand simply hands a tactical win to the other factions,” he said. According to the analyst, the true consequences will only reveal themselves much later – around 2020 – but will also likely face many court challenges along the way. Reserve Bank governor, Lesetja Kganyago has been vocal in his opposition to the nationalisation of the bank, and said that he would challenge any threat to its independence. In a presentation at Stellenbosch University on Wednesday, Kganyago said that the bank’s independence was important in helping the SARB to achieve its mandate. “The central bank independence allows the SARB to hear what different interest groups have to say, but gives it the policy space to make decisions about inflation that on balance benefit all,” he said. However, Kganyago’s days at SARB are numbered, with his term coming to an end following the 2019 elections – with his retention up to president. With the ruling ANC likely to retain its majority in the national election this year, the decision whether to retain Kganyago as governor will be made by president Ramaphosa. According to Bloomberg economists, by appointing Kganyago again, Ramaphosa would boost policy certainty and consistency at the central bank. Read: Dark day for the rand as Ramaphosa’s Reserve Bank comments and Eskom price hikes hit<doc-sep>National Nothing sinister about nationalising Reserve Bank, says Cyril Ramaphosa Credit rating agencies have warned SA not to tamper with the independence of the central bank, saying it could lead to ratings downgrades BL PREMIUM 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 par...<doc-sep>
President Cyril Ramaphosa says the South African Reserve Bank should be owned by the people, as he renewed the ANC’s promise to nationalise the central bank. Speaking during a parliamentary Q&A session on Thursday (7 March), Ramaphosa said that nationalising central banks was nothing new, and that similar steps had been taken by a number of other countries around the world. South Africa is one of only six countries that still had external shareholders in their central bank, he said. “The United Kingdom used to have external shareholders in the 1940s. They realised that in order to advance the economy the Central Bank should be wholly-owned by the people of the United Kingdom. “This is the done thing around the world,” he said. Ramaphosa added that nationalising the bank would confirm sovereignty. “Obviously, we need to go through the correct processes (when implementing nationalisation) but that is the position – there is no hidden agenda,” he said. Rand hit Despite Ramaphosa’s assurances, the rand was trading weaker on the announcement and was priced at R14.33 to the US dollar at 15:50. “The markets are perceiving this as undermining the SARB’s independence which is largely negative for the local currency,” said Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions. “The full extent and nature of President Ramaphosa’s announcement will need to be analysed extensively to determine if government will have authority over the mandate of the SARB,” she said. “The rand is demonstrating severe volatility and further potential depreciation is possible. The next important trading barrier for the rand will be at the R14.50/dollar level.” Notably, Ramaphosa and the ANC appear to stand in opposition to reserve bank governor, Lesetja Kganyago, who has previously emphasised the importance of independence of the institution. In a presentation at Stellenbosch University on Wednesday, Kganyago said that the bank’s independence was important in helping the SARB to achieve its mandate. “The central bank independence allows the SARB to hear what different interest groups have to say, but gives it the policy space to make decisions about inflation that on balance benefit all,” he said. “Independence also matters for ensuring effective monetary and fiscal policy coordination. “Much monetary theory involves figuring out how to avoid high inflation and its impoverishing effects. Sometimes high inflation is caused by the excessive ambitions of sovereigns to spend fiscal resources on projects that do little to generate long-run economic growth. “Continuous fiscal deficits reflect those ambitions, and because those deficits are financed with debt, they create a tax liability for citizens in the future.” Read: Treasury is going ahead with South Africa’s expat tax – and experts say it could be devastating