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Sunday Read: TIMELINE – When the Reserve Bank has come under fire, and what Kganyago did about it
The Reserve Bank’s independence has been thrust again into the spotlight, with calls by ANC secretary general Ace Magashule to have its mandate expanded.
Former governor and now Finance Minister Tito Mboweni has spoken out against Magashule’s comments, while current Reserve Bank Governor Lesetja Kganyago – by now a veteran of controversies around the SARB’s independence – referred to “barbarians at the gate” of the bank.
Fin24 considers all the times in recent years that the bank and its mandate – which is primarily to protect the currency – have faced opposition, and what was the outcome.
2014: Lesetja Kganyago succeeds Gill Marcus as SA Reserve Bank (SARB) Governor. The EFF calls for the bank to be nationalised and criticises the bank for implementing inflation targeting to protect the currency. The Pan Africanist Congress echoes views to have the bank nationalised.
June 19, 2017: Public Protector Busisiwe Mkhwebane releases a report about a bailout extended by the Reserve Bank to Bankorp between 1985 and 1995. The report contains a remedial action ordering that the portfolio committee on justice and correctional services initiate a process to change the constitutional mandate of the Reserve Bank.
June 27, 2017: The Reserve Bank institutes court proceedings to have the public protector’s report reviewed and the remedial action set aside.
July 10, 2017: The public protector decides not to oppose the Reserve Bank’s review application upon the advice of her legal counsel. However, in her answering affidavit, Mkhwebane lists examples of other central banks such as China, India and the UK which have expanded their mandates beyond currency stability.
July 28, 2017: At the Reserve Bank’s 97th ordinary shareholder annual general meeting, Kganyago says the bank will proceed with the court proceedings despite Mkhwebane’s decision not to oppose. The bank wants a final decision to be declared by the courts. Speaking to journalists following the AGM, Kganyago stresses the role of the bank in protecting the value of the currency. He hits back at Mkhwebane’s comments that the bank has a “narrow focus” and explains that inflation targeting indirectly impacts socio-economic issues.
He also defends the private shareholding of the bank as shareholders have limited rights and cannot influence the mandate of the SARB.
August 15, 2017: Justice Cynthia Pretorius rules in favour of the Reserve Bank and sets aside the public protector’s remedial action for the bank’s mandate to be changed. Mkhwebane is ordered to pay costs for the application, up to and including the filing of her answering affidavit, and the employment of her counsel.
December 20, 2017: At its elective conference, the ANC solidifies a resolution of its policy conference in June/July of that year, to have the SARB nationalised.
December 21, 2017: The next day the Reserve Bank issues a statement warning that changing the ownership structure of the bank, at that point in time, could raise financial and economic risk and uncertainty for the country.
February 1, 2018: Kganyago is honoured by being named the Central Banking’s Governor of the Year for 2018. The Central banking Awards, first launched in 2014, note Kganyago’s efforts in in defending the bank’s independence. Kganyago is quotes as saying that the bank’s independence will continue to be protected.
March 6, 2018: The ANC withdraws a motion to debate the nationalisation of the SARB in Parliament. The party says it will consult further on the matter with its structures and key stakeholders.
May 25, 2018: The EFF’s Reserve Bank Amendment Bill is gazetted for public comment. The bill seeks to amend the act to make the state a sole holder of the shares of the bank.
July 27, 2018: In an interview with Bloomberg Kganyago warns that nationalising the Reserve Bank could be an expensive legal process if some shareholders try to make a profit out of it.
August 16, 2018: Kganyago briefs Parliament’s standing committee on finance on the SARB’s annual report. He tells members of Parliament that resolutions of the ruling party (ANC) will only be implemented if they become government policy. Even then, the bank will only implement policy if it does not interfere with its mandate. He reiterates that the Constitution sets out the mandate of the Reserve Bank and ensures its independence.
January 23, 2019: President Cyril Ramaphosa tells investor at Davos that the operational independence of the Reserve Bank and its ownership are separate issues. He assures that government will not interfere with the bank’s operational independence.
January 25, 2019: In a parliamentary reply to a question from former DA MP David Maynier, Deputy President David Mabuza reaffirms the ANC’s decision to nationalise the Reserve Bank and to place public interest and development at “the centre of its existence”.
March 6, 2019: Delivering an address at an event hosted by the Stellenbosch University Bureau for Economic Research, Kganyago stresses the importance of maintaining the Reserve Bank’s independence. “In pursuing its mandate, the SARB must act independently and without fear and not cut interest rates just to accommodate someone, but to act in interest of society.” He warns that without independence “other actors” will be able to sway the banks actions.
March 7, 2019: A day after Kganyago’s speech, Ramaphosa tells Parliament that the resolution of the ANC to nationalise the SARB will be implemented.
April 23, 2019: Canvassing for ANC votes ahead of the elections, former president Thabo Mbeki assures that nationalising the Reserve bank will not change its operations.
June 4, 2019: Following the ANC’s National Executive Committee’s (NEC) Lekgoetla over the weekend, the party holds a media briefing where Magashule says the party has agreed the Reserve Bank’s mandate should be expanded beyond price stability to make it an active agent in economic transformation and job creation. He also said the NEC had asked government to appoint a task team to explore quantitative easing.
However ANC’s sub committee for economic transformation Enoch Godongwana tells TimesLIVE that Magashule’s statement is inaccurate and no decision has been made to expand the Reserve Bank’s mandate.
Mboweni joins the chorus and takes to both Facebook and Twitter to hit out at Magashule’s comments, saying that the government determines the mandate of the Reserve Bank. ” Let us leave the South African Reserve Bank alone to pursue its mandate without fear, favor or prejudice,” the minister wrote on a Facebook post.
June 5, 2019: Kganyago in the mean time has spoken about quantitative easing, saying that conditions for it currently do not exist in SA. He told CNBC Africa for quantitative easing to be an option for a central bank, inflation must be so low that it threatens to go below zero, while interest rates must be very low or near zero.
Speaking at an Investec event on the same day, Kganyago said the bank would approach the courts, once more, to protect its independence, Fin24 reported.