In the midst of internal squabbles within the African National Congress (ANC) about the nationalisation of the South African Reserve Bank (SARB), the Democratic Alliance (DA) has lambasted the ruling party for endangering the country’s fragile economy.
DA: Tito Mboweni was right, leave the Reserve Bank alone
On Thursday, SARBs Monetary Policy Committee announced that the repo rate has been reduced by 25 base points, to 6.25%.
While this holds promise for lower prime-linked interest rates, it does not mean that the economic growth outlook is positively impacted.
In fact, South Africa’s governor, Lestji Kganyago revealed that growth predictions for the country’s economic performance in the next two years have been reduced from 1.6% to 1.2%.
The governor revealed that uncertainty in the reliability of state-owned entities like Eskom and pending mass retrenchments from retail giant, Massmart, has strained an already weakened economy.
The last thing it needs, according to DA Shadow Minister of Finance Geordin Hill-Lewis, is rumblings of a Reserve Bank takeover.
Hill-Lewis, in a statement, addressed the in-fighting taking place in the ANC about the nationalisation of SARB. A faction of the party’s Top Six has pushed for the government to take full ownership of the central bank.
However, Finance Minister, Tito Mboweni, drew ire for advising against this, warning that it would cause irreparable harm to the economy.
“The proposal to nationalise the Reserve Bank is based on economic lunacy. It will bring no benefit, and only increased hardship, to South Africa.
“If President Ramaphosa has any desire to prove he actually leads his own government, he should end this discussion immediately by reinforcing the independence of the Reserve Bank. Instead, he is kneeling to populists in his party and allowing this debate to continue,” Hill-Lewis warned
Why the ANC is pushing for nationalisation
South Africa’s reserve bank is one of the fewest central banks, in the world, that has private shareholders. The bank has an estimated 261 000 shares split between more than 600 private shareholders, with Parliament only able to function in a supervisory role.
Many of these shares are owned by people who do not reside in South Africa, the majority shareholder being Michael Duerr, a German with a 57.5% ownership stake in the central bank.
Certain factions of the ANC have always pushed for amendments to the Reserve Bank Act. The purpose of this was to see the government take control over the decisions of the bank whose function is to oversee the monetary policy activities of the broader economy.
Hill-Lewis has argued that more than anything, the ANC’s divided stance on the issue can also be detrimental to the economy.
“While the conditions for South Africa’s economic collapse accelerate, the ANC would do well to listen to its Minister of Finance on this catastrophic move for our ailing economy. This would also ensure the ANC provides less mixed messaging and more concrete plans for South Africa’s economic prosperity,” he said.