JOHANNESBURG – African National Congress has re-triggered market concern about the independence of the Reserve Bank after reports it had agreed at its policy conference on Wednesday that the reserve bank should be nationalised.
Two party sources said a proposal to make the reserve bank fully state-owned was agreed at a party plenary session.
The rand currency extended losses to 2 percent against the dollar in response to the proposal that filtered out of a closed-door session on the last day of the conference. It later recovered to trade down 1.4 percent at 13.39 against the dollar.
Calls for nationalisation follow an earlier row over reserve bank’s mandate that rattled foreign investors just as South Africa’s economy fell into recession and as unemployment is close to 28 percent.
Following the plenary on Wednesday, the head of the ANC’s economic transformation committee Enoch Godongwana told reporters the bank’s independence should be guaranteed but it was a “problem” that the regulator was in private hands.
“The resolution agrees that the independence of the Reserve Bank should be guaranteed … But there is general agreement that the Reserve Bank that is still private centric is an anomaly,” Godongwana said.
Most central banks in the world are wholly state-owned. But the mention of nationalisation in South Africa is enough to spook investors as left-wing elements of the ANC have also called for mines and banks to be state-owned.
“It’s largely symbolic but is a clear statement of intent from the ANC on more to come,” said Nomura emerging markets analyst Peter Attard Montalto.
“Ownership doesn’t legally allow them to do anything as shareholders. That conflicts with the constitutional mandate, but it shows the direction of travel here.”
Policy recommendations made at this week’s conference will only be approved for implementation at a December summit when a successor to President Jacob Zuma will also be chosen.
INFLATION AND GROWTH
The proposal is particularly sensitive after an official anti-graft watchdog last month recommended the reserve bank’s mandate be changed to place more focus on growth and not just inflation and the currency.
The South African Reserve Bank has been privately owned since its establishment in 1921.
The shareholders have no rights or involvement in the conduct of monetary policy, financial stability policy or banking regulation.
Other recommendations made by the ANC’s economic committee included conducting a land audit to address the racial inequality in ownership 23 years after the end of apartheid, Godongwana said.
NATIONALISATION WOULD NOT AFFECT MANDATE
Changing its shareholding will not affect its mandate, the regulator said on Wednesday hours after the ruling party proposed at a policy conference to nationalise the bank.
“The shareholding of the SARB (South African Reserve Bank) has no bearing on the policy or regulatory role that the SARB plays,” the bank said in an emailed statement to Reuters, saying it had noted the resolution by the African National Congress.
The bank said that even if its shareholding were to change, it would continue to derive its mandate from the constitution.
The party’s proposal is likely to raise concerns about the independence of the reserve bank after an anti-graft watchdog recommended its mandate be changed to place more focus on growth and not just inflation and the rand currency.
CHALLENGING PROPOSAL IN COURT
Finance Minister Malusi Gigaba said on Wednesday he would challenge in court a proposal by the anti-graft watchdog to change the reserve bank’s mandate of maintaining currency and price stability to focus instead on growth.
“The Minister believes that the proposed constitutional amendment is not necessary. The Constitution does not contemplate the protection of the currency for its own sake, but specifically in the interest of balanced and sustainable economic growth,” the ministry said in a statement.
“There is no intention in the part of the executive to amend the constitution in any manner.”