Cape Town – The rand was knocked on Wednesday after Bloomberg reported that the African National Congress (ANC) has proposed that the South African Reserve Bank should be wholly state-owned, according to three people familiar with the situation.
The rand fell by about 1.5% to R13.45 against the dollar at 12:55, but pulled back to R13.38/$ by 13:10.
“News from the ANC national policy conference is that the ANC is purposing that the SARB is to become state owned,” TreasuryOne told investors in a message on Wednesday. “This has not been taken well by the rand and has shot up to 13.4500,” it said. “(The) rand has pulled back slightly and is currently at 13.3800.”
- Lesetja Kganyago: Let’s base discussion of monetary policy on facts
Bloomberg reported that the proposal was approved in a plenary session at the party’s policy conference in Johannesburg on Wednesday, according to the people who asked not to be identified because it hasn’t been made public. Decisions taken at the policy conference, which ends on Wednesday, need to be ratified at the party’s national electoral conference in December.
Since its establishment in 1921, the Reserve Bank has always had private shareholders who have no say over policy or the appointment of the governor. They vote to appoint seven of the central bank’s 10 non-executive directors. The board also includes the governor and three deputy governors as executive directors, is responsible for the governance of the central bank.
Removing private shareholders would have no immediate effect on policy though it could be seen as symbolic, said Peter Attard Montalto, chief emerging-markets economist at Nomura.
“It would be seen as a step toward greater direction of policy and shifts in mandate,” Montalto said by email.
The bank’s shares were delisted from the Johannesburg Stock Exchange in 2002 and are bought and sold on an over-the-counter trading and transfer facility.
The Reserve Bank is owned by more than 600 private shareholders who can’t hold more than 10 000 share each, according to its website. The dividend payable to shareholders is limited to 10 cents per share per year, of a total of R200 000 a year, if the central bank makes a profit. The bank’s after-tax profit for the year through March was R1.4bn.
Earlier, TreasuryOne said emerging markets were getting sold off, with the rand losing ground.
“Gold is also off around $6 and EUR, GBP, CHF and JPY is also softer against the USD. The Fed minutes of the meeting held on 14 June is due later today, but for the moment the USD is well and truly on the front foot.”
Finance Minister Malusi Gigaba told an ANC gathering on Friday that the party “should all insist on the independence of the Reserve Bank to set monetary policy within the framework defined both in the Constitution and the law”.
This comes after Public Protector Busisiwe Mkhwebane released a report last month, in which she recommended the Constitution be changed to alter the mandate of the bank.
SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.