Julius Malema’s plan to nationalise SA Reserve Bank is back — with added weight

EFF leader Julius Malema introduced a private member’s Bill to Parliament in 2018 to nationalise the South African Reserve Bank. It was kicked into touch then — but now it’s back with added MK blessing.

Nationalising the South African Reserve Bank (Sarb) is a key policy plank of two of the four largest political parties in Parliament: the EFF and MK. Now they’re getting a new bite at the cherry.

That was the upshot of a meeting of Parliament’s standing committee on finance on Wednesday, where it was resolved — against the objections of the DA — that the Sarb Amendment Bill be referred for public participation once again.

The EFF has previously been a relatively isolated voice in Parliament on this issue. It now has allies in the form of MK, and presumably, the rest of the so-called Progressive Caucus. While these numbers alone cannot pass a Bill in the legislature, there was an unexpected sign in the committee that at least some ANC MPs might be softening on the idea.

Bill would give ownership of Sarb to finance minister

Dr Dumisani Jantjies, the director of the Parliamentary Budget Office, on Wednesday took the finance committee through a briefing on Malema’s proposed Bill and its history.

Malema was not present at the meeting, but has indicated that he wishes the Bill to be revived, hence the committee’s reconsideration of the matter.

“The Bill proposes the nationalisation of the shares in the Reserve Bank to remove any private shareholding in the bank,” Jantjies told MPs.

“The amendment aims to grant the government, through the minister of finance, the exclusive ownership and responsibility for Sarb’s governance, which includes the appointment of all the board of directors.”

As things stand, Sarb has 830 shareholders — some are trusts and some are private individuals. No shareholder may hold more than 10,000 shares. Being a shareholder of Sarb is of almost no financial value; dividends paid out this year were priced at 5c a share.

The shareholders, Sarb’s website states, have “no rights or involvement in determining monetary policy, financial stability policy or the regulation and supervision of the financial sector”.

Their only involvement is in attending the Sarb AGM, voting for seven non-executive directors of the board, and appointing external auditors.

Despite this very limited involvement, the EFF and MK are adamant that having the bank in the hands of private shareholders is a block to the economic transformation of the financial sector.

Although committee chair Joe Maswanganyi said in Wednesday’s meeting that the matter had been the subject of “heated debate” within the ANC, it has never come before Parliament to be voted on.

Malema’s private member’s Bill was introduced in 2018, lapsed, was revived in 2019, sent for public hearings in 2020 and then sat dormant until Jantjies’ office was requested at the end of 2023 to provide more research on the matter.

Jantjies told the committee that private ownership of a country’s central bank was an “anomaly”, with only the US’s Federal Reserve and Sarb being “100% privately owned”.

One of the major controversies of Malema’s proposed amendment is that it would simply see the government nationalising the Sarb shares without compensation, which would probably require a constitutional amendment.

Another concern, as articulated by Wits economist Jannie Rossouw in a 2018 op-ed, is that the real intended purpose of the legislation is “control of monetary policy by politicians”.

Rossouw wrote: “Experiences from other countries that do this, like Zimbabwe and Venezuela, are not good. They are all economic basket cases.”

The analysis given to Parliament by Jantjies on Wednesday was decidedly more positive.

While noting the constitutional pitfalls, Jantjies’ presentation also highlighted the potential of a “developmental central bank in South Africa” to “finance government spending, reduce the cost of government borrowing, capitalise development finance institutions and use regulatory levers to influence the allocation of private capital”.

Jantjies’ report also claimed: “Increases in the money supply are not typically, by themselves, a cause of hyper-inflation… Most hyper-inflations are due to profound structural disruptions in economies, such as famines or wars or gross mismanagement of the supply side of the economy, not the demand side”.

In essence, Jantjies’ message to MPs was that neither the worst-case or best-case scenarios around nationalising Sarb were likely to be accurate: a nationalised Sarb would also not be the automatic silver bullet to addressing economic development goals in the way MK and the EFF imagine.

‘There is no GNU here’

MK MP Des van Rooyen, South Africa’s shortest-lived finance minister, told the committee that his party’s manifesto pledge to nationalise Sarb was what had ensured its unexpected electoral success.

“If there’s anything MK party did to secure a lot of votes from South Africans, it’s this item,” he said.

Van Rooyen hailed the nationalisation as a “long overdue” measure that “can improve the lives of South Africans”, though he did not specify how.

“How expeditiously can we move with this process?” he asked.

EFF MP Omphile Maotwe said bluntly: “The time for us to watch people eating our food is gone.”.

She said giving the power to appoint Sarb non-executive directors to the minister of finance rather than private shareholders was more appropriate because the relevant minister would be drawn from the pool of individuals “democratically elected” by the South African people to serve in the National Assembly. (Not necessarily: the President has the prerogative to select two ministers from outside the National Assembly.)

Maotwe also claimed that of the 830 current Sarb shareholders, “90% are foreigners, it’s a fact.”

This is false. A scan of the shareholder index as of 30 June 2022 shows that a handful are domiciled outside South Africa. These shareholders are also not permitted to vote.

DA MP Andrew Bateman was vocal in his opposition to the proposed amendment, asking: “Is the independence of the Sarb compromised by the Bill? I would say, absolutely it is”.

Bateman accused Jantjies of presenting “economic theory but not economic consensus” and of using his presentation to push “a particular economic agenda”.

The DA MP said that the case of Zimbabwe should serve as a cautionary tale about the dangers of printing money and hyperinflation: “Investors don’t want to invest where currency becomes debased. Our currency has to have credibility.”

But in another display of the cracks beginning to appear in the GNU, Bateman was implicitly rebuked by ANC MP Lusizo Makhubela, who expressed tentative enthusiasm for the Bill — saying she didn’t see much “wrong with it”.

Makhubela also said that comparisons with Zimbabwe should be avoided.

When Maswanganyi proposed concluding the matter by sending it on for further public participation, a clearly surprised Bateman suggested that ANC MPs should “consult their party” before agreeing to this.

“There’s no GNU here,” another MP shot back, while Bateman defended his remark on the grounds that further public participation would be unnecessarily expensive if the Bill were ultimately found not to be “desirable”.

Maswanganyi responded: “Democracy is not cheap.”