News analysis
The South African Reserve Bank (SARB) cut the benc
File photo of Lesetja Kganyago. (Getty)
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  • The Reserve Bank is coming up to an election where it will likely be a political football.
  • The SARB is studiously staying out of politics, even the debate on its own nationalisation.
  • But there is a red line that would require intervention, says governor Lesetja Kganyago.

South African Reserve Bank (SARB) governor Lesetja Kganyago and his deputies would this week not be drawn on their expectations of how next year’s elections – where monetary policy is expected to be a political football – will affect the bank and its work.

“The one thing the staff of the Bank are not good at is reading politics,” Kganyago joked at an informal meeting with editors on Thursday. They are “very good with numbers” though, he said.

The ANC has a formal policy to remove symbolic private shareholding from the SARB structure, and the EFF has submitted a draft law that would do so by the unlikely mechanism of simply making all references to such private shareholders disappear from law. Various political groups have called on the Reserve Bank to allow a higher rate of inflation to stimulate job growth, or have otherwise lobbied for changes to monetary policy.

See also: Julius Malema just put his draft law to nationalise the Reserve Bank before Parliament – by just writing private shareholders out

Globally, central banks are concerned that their independence is under threat, said Kganyago, referring obliquely to comments by US President Donald Tump about the American Federal Reserve. But the SARB is done participating in the debate around its nationalisation.

“I have said everything that needs to be said,” Kganyago said.

What he has said has trod a fine line. At the SARB’s annual general meeting for shareholders in July, he stressed that private shareholders have no influence at all on policy, and said that the Bank had “no strong argument in principle” for keeping such private shareholders around. At the same time he warned that “getting rid of private shareholders would not necessarily strengthen governance” – and pointed to failures of governance at state-owned companies that had boards entirely appointed by cabinet ministers.

In court papers in 2014, before the current push for nationalisation, the Bank made one strong argument for private shareholding.

“The private shareholding in the Bank is also derived from the premise that the more representative a board of a central bank is of the wider community, the more likely it is of gaining the support and acceptance of the general public,” it said at the time.

While Kganyago would not speak of expectations of what 2019 might bring, or say specifically at what point the SARB would engage with political parties on their utterances about monetary police and inflation, he sketched out the broad strokes of what would require intervention.

There are people “concerned that growth is not taking place, jobs are not being created, nobody is doing doing anything” who then say about the Reserve Bank “here is an institution that is working, maybe if we scream loud enough, maybe they will do something about it.”

In such cases, the SARB is happy to counter with intellectual arguments, said Kganyago. 

Another group believes that with control of the central bank would come the ability to have it finance small businesses or agriculture, he said. But that kind of direct intervention brings new risks and new trouble.

“Trying to suck the central bank into all of these activities is really worrying,” he said.  

A third group, with nefarious intent, approached the SARB with the thinking “that oh, the banks have closed accounts of some customers and if we control this [Reserve Bank] we can get this Bank to licence banks that will ignore the law and then maybe they won’t close the accounts of customers that are non-compliant,” said Kganyago – never directly referring to the Gupta family.

“That we will fight,” he said. “There is nothing to explain, we just have to fight it.”

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