Opposition firebrand Julius Malema introduced a bill to nationalise South Africa’s central bank, putting pressure on the ruling ANC to go through with a plan it shelved this year and rattling markets wary of threats to the bank’s independence.
The rand fell more than 1 percent overnight after parliament released details on the bill, including clauses to “make the state the sole holder of the shares in the bank” and “provide for the appointment of certain board directors by the (finance) minister”.
The South African Reserve Bank - which has been privately owned since it was established in 1921 - said that the bill, if passed, would not affect its independence or primary mandate of price stability.
But the suggestion of following most countries by bringing the institution into state ownership was a sensitive one - particularly after the past administration was accused of meddling in the bank’s appointments and decisions.
Malema’s far-left Economic Freedom Fighters (EFF) party - with only 25 out of the country’s 400 parliamentary seats - would have no chance of pushing the bill through on its own.
But the ruling African National Congress (ANC) has backed the smaller party’s bills before - including divisive legislation in February pushing to expropriate white-owned land without compensation.
The ANC promised to study the proposed privatization - a policy it had said it would pursue in December, when it called the central bank’s ownership status a “historical anomaly”. The party put the plan on the back-burner three months later, saying it needed more consultation.
The rand closed at 14.7275 versus dollar, driven by an emerging markets sell-off.
“With the independence of the central bank once again potentially in question, this combined with all of the other investor unfriendly headlines locally, (is) likely to keep the local unit on the back foot,” Nedbank analysts said.
The bank’s private shareholders have no control over monetary policy, financial stability policy or banking regulation.
On top of market concerns, the central bank has also warned that buying out those private shareholders would be expensive as some would likely sell their stakes at a premium.
Malema and his party did not make an immediate statement on their bill. But they have regularly argued for the nationalisation of a wide range of assets - including mines and banks - and said the central bank should not be owned by private shareholders without a direct interest in the country.
The party - launched after Malema was expelled from the ANC in 2012 - has been pushing its plans to nationalize assets and to redress racial disparities in the build up to elections in 2019.
Re-dessiminated by The Asian Banker from Reuters