The deep divide within the ANC caused by the implementation (or lack thereof) of Nasrec resolutions widened further this week, with Finance Minister Tito Mboweni (an ally of President Cyril Ramaphosa) and the ANC Youth League (ANCYL) (who lean to party secretary-general Ace Magashule’s side) making vastly opposing submissions before Parliament’s portfolio committee on finance.
The submissions were made in relation to a private member’s bill brought forward by EFF leader Julius Malema on the SA Reserve Bank Amendment Bill (B26–2018), which would allow for the nationalisation of the Reserve Bank.
Echoing a stance held by the Ramaphosa faction, Mboweni and National Treasury reiterated their opposition to nationalising the bank, highlighting the legality of such a move and the cost implications it could have for the country.
However, the ANCYL, adopting a stance held by Magashule and the so-called radical economic transformation forces, threw their support behind the red berets, joining in the call for an amendment to the bill and arguing that the governing party had undertaken to nationalise the bank at its 2017 elective conference in Nasrec.
Since the disbandment of the ANCYL two years ago, youth affairs have been handled by the ANCYL task team. Recently, however, members of the league who were unhappy with the task team have formed themselves into the ANCYL crisis committee.
Under the committee’s banner, the young lions argue that the Reserve Bank played too critical a national role to remain under private ownership.
“It [the Reserve Bank] is to the economy of the country what the SA [National] Defence Force is to its people. If the Reserve Bank fails, the country fails,” they declared.
They said that private shareholding in the Reserve Bank was a strategic threat to the development of the country’s economy, since “chief among its roles” were the mammoth tasks of being the sole printer of banknotes, hosting the registrar of banks and protecting the national currency.
“The monetary policy of the country is the exclusive preserve of the bank’s monetary policy committee. In other words, the Reserve Bank should act as a buffer that protects our economy from undesirable economic turmoil and shock,” the youth league members argued.
They added that the Reserve Bank primarily oversaw duties that had a huge impact on the welfare and livelihood of the country’s populace.
“The Reserve Bank regulates the cost of consumption or saving interest rate adjustments. It also regulates the banking sector and movement of money into and out of the country, duties that are fundamental to the social security of South Africans,” they said.
The governing party’s youth wing also raised concerns about the bank’s directors being elected by shareholders, saying that – given the importance of the bank’s role in society – the appointments should be overseen by government.
“Shareholders are also making generational wealth through the Reserve Bank. By 1989, the share price of the bank was only R1. While voodoo economists suggest that there’s no real financial value in owning these shares, since they pay – at most – a 10c per share flat rate a year, it’s worth noting that the share price is increasing. The shares can be traded at a time of need for a very high price. It’s our view that the Reserve Bank can’t be an instrument for family wealth creation,” argued the youth league.
In stark contrast to these submissions, Mboweni – through a written submission made on his behalf by National Treasury deputy director-general, Ismail Momoniat – reiterated that government had fundamental objections to the nationalisation of the Reserve Bank.
Mboweni questioned the constitutionality of amending of the SA Reserve Bank Bill, the lack of detail about funding and cost implications in the submission made by the EFF, and the “legal and economic uncertainty this would generate”.
Furthermore, he wrote that the bill did not align with the current policy objectives and funding priorities of government.
“While government notes the preference of the ruling party for a fully state-owned central bank, this cannot be at the cost of more policy and economic uncertainty, risks to investment and loss of confidence in our country,” he wrote.
In addition, the proposals in the bill would expose the fiscus to punitive costs, particularly from foreign investors under bilateral investment treaties.”
While Mboweni acknowledged that the ANC’s official position was nationalising the Reserve Bank, he highlighted the fact that Ramaphosa had said that it was presently “not prudent” to do so, given the country’s economic and financial position.
This was in direct contrast to views expressed by Magashule last week during his door-to-door campaign leading up to the nationwide by-elections, when he said that resolutions reached at the 2017 Nasrec party conference would “be implemented without fail” and no one could prevent that from happening.
Magashule also suggested that he was being persecuted by the Ramaphosa faction for taking this stance.
In making their submissions this week, the ANCYL echoed similar sentiments, saying party resolutions needed to be implemented at all costs, as they were intended to benefit the poorest of the poor.
As such, the youth league said changes to the existing primary act needed to be made regarding the bank’s ownership and shareholding, as well as the number of board members.
“In line with international practice, we propose that only seven board members govern the affairs of the Reserve Bank and the complete deletion of subsection 3 from the act.
“Thus, section 4(1) should read as follows: ‘The bank shall be managed by seven directors consisting of (a) governor, three deputy governors and three other directors appointed by the president of the Republic after consultation with the minister of finance.’”
They proposed that the seven board members be nominated by members of the public, as the bank would be a public-interest organisation.
“The minister must gazette the nomination procedures and protocols within a month of the adoption of this act by Parliament,” said the youth league.