Officials from the South African Reserve Bank have called the debate surrounding nationalising the Reserve Bank or changing its mandate “simplistic” and said shifting it to complete state ownership would be a costly endeavour with little benefit.
The Reserve Bank officials were speaking in Cape Town on Thursday evening during that city’s leg of the Reserve Bank’s monetary policy forum.
This comes as the debate on expanding the mandate of the Reserve Bank as well as nationalising the central bank heated up during the course of this week.
The African National Congress resolved in its 2017 national conference to buy out Reserve Bank shareholders to put the bank under state control. Last year the Economic Freedom Fighters tabled a bill to give government more control over the central bank.
ANC heavyweights have made conflicting statements about whether the party planned to expand the central bank’s mandate this past week.
On nationalisation, Reserve Bank Monetary Policy Committee member and head of economic research and statistics Rashad Cassim said what was being argued in the political arena was not wrong, but just “simplistic”.
“There is nothing wrong with taking the central bank from private shareholders. Not a problem. The president has mentioned that. But why are you doing it? It is a cost to pay from public debt with little gain and that is a different debate from inflation targeting, which is a good debate to have,” said Cassim.
Reserve Bank lead economist for regional policy David Fowkes said there was little reason to believe nationalising the Reserve Bank would impact on its independence, but said other matters needed attention if politicians were serious about improving the state of the South African economy.
“There are two issues here. Nationalisation and mandate. Some central banks are wholly owned by the state but remain independent. There are many perfectly adequate central banks that perform their mandates well. This is way down at the bottom of the list of things we should be looking at to resolve the problems of our economy. But there are a lot of reasons why some would not want nationalisation. For starters, it would be expensive.
Squeezed tax base
“There is a lot of legislative change and re-engineering to do, and you pay off a lot of people just to wind up on the exact same place you were before you did it. If you could find a way to do it cheaply, I would be all for it,” Fowkes said.
Reserve Bank associate economist Bojosi Morule said quantitative easing was a fine balance to strike and that all decisions had to be taken with care.
“Even if debt denominated in your own currency affects what you pay, there is an issue of controlling inflation and in SA’s extremely squeezed tax base, that would not be possible, so it is just difficult to see it happening on various fronts,” said Morule.