South African Reserve Bank – Sacrosanct institution or government plaything?

Earlier this year, the Public Protector (PP), Ms Busisiwe Mkhwebane, a well-known Zuma acolyte, sought to dredge up a decades-old rescue of the SA financial system by the South African Reserve Bank (SARB), alleging ABSA benefitted improperly at the time. Last month, she compounded her folly by drafting an amendment to the SARB’s mandate which would do away with the SARB’s current mandate to target inflation and introduce a blatantly social growth agenda.

The international reaction was universally negative. More interesting, though, was that the local response was equally negative. Both the Minister of Finance, Malusi Gigaba, himself accused of being in the Zuma camp, and the Governor of the SARB, Lesetja Kganyago came out strongly against the PP accusing her of amongst other things, “[being] ill-informed and reckless”, [causing] a serious and detrimental effect on the economy and… holds the risk of causing further rand depreciation, further rating downgrades and significant capital outflows”, and each of them instituted legal proceedings against her to “[stop] this gross overreach in its tracks so that certainty and predictability about the Reserve Bank’s role in our constitutional democracy is affirmed”.

The call at its recent Policy Conference by the ANC to nationalise the SARB simply compounded fears.

The PP is clearly trying to divert attention away from what her office should be doing and that is enforcing the State Capture report of her predecessor, Thuli Madonsela.

What are the facts?

1. The SARB has 650 shareholders. It is not government-owned, and any attempt at nationalisation would require buying out those shareholders with taxpayers’ money which has not been budgeted.
2. The mandate of the SARB has nothing to do with its ownership. The owners do not dictate its mandate.
3. The SARB’s mandate is laid down in the much-lauded Constitution of South Africa and states that “The primary object of the South African Reserve Bank is to protect the value of the currency in the interest of balanced and sustainable economic growth in the Republic.”
4. From the SARB’s website, “The primary purpose of the Bank is to achieve and maintain price stability in the interest of balanced and sustainable economic growth in South Africa”.
5. Being part of the Constitution means that a two-thirds majority is required to change the SARB’s mandate and it is way beyond the ambit of an “unelected functionary” (the Governor’s words) to change it and equally beyond the ANC’s power with its severely diminished power in Parliament to effect a Constitutional amendment.

Taking the facts into account, it is clear that the pronouncements by the PP are a blatant attempt to distract the public. It is also clear she has not read the current SARB mandate herself as it clearly contains an objective of balanced and sustainable growth for the country.

In an interview yesterday with respected economist Dr Iraj Abedian, he said, “In my view, it is a sign of desperation on the part of the so-called political idiots who have nothing have nothing else to put out for social debate”.

In summary, the noise around the SARB is just that. It has already harmed the rand, but it is likely the story will wash over soon or be supplanted by another pronouncement borne out of desperation. The SARB is a critical part of the independent separation of powers in South Africa and will remain that way.