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Ramaphosa on SARB nationalisation: There is no 'manga-manga' business

Mar 07 2019 16:04
Mike Cohen, Bloomberg and Carin Smith, Fin24

South Africa’s ruling party has taken a decision to nationalise the South African Reserve Bank and it will be implemented, President Cyril Ramaphosa has said.

"We have got to go through processes," Ramaphosa told Parliament in Cape Town on Thursday. "There is no hidden agenda."

Ramaphosa’s comments come a day after he was scheduled to meet with Reserve Bank Governor Lesetja Kganyago in Cape Town. Kganyago on Wednesday emphasised the importance of central bank independence in a speech on a university campus.

'The done thing'

South Africa is one of a handful of countries whose central bank is owned by private investors and the move to bring it under the control of its citizens will affirm the nation’s sovereignty, Ramaphosa said.

"We have a situation where we have external shareholders who live in various countries in the world. SA is one of only six countries in the world that still has shareholding in their central banks," said Ramaphosa.

He said the UK used to have shareholding in the Bank of England, but that has changed.

"This is the done thing around the world. The central bank is one of the most important institutions in the life of our country. And that is what the ANC resolved should be done," said Ramaphosa.

"Obviously we have to go through processes to see how best that decision can be implemented. There is no hidden agenda. There is no 'manga-manga' business."

What you need to know about The Reserve Bank’s owners

The Reserve Bank has about 770 shareholders and 2 million shares outstanding.

Investors are allowed a maximum of 10 000 securities each, which gives them a prescribed maximum dividend of R1 000.

The last traded price for the shares, which are available over the counter, was R9 in January.

The rand was trading weaker following the announcement by Ramaphosa and by late afternoon on Thursday was priced at R14.34/$.
 
"The markets are perceiving this as undermining the SARB's independence which is largely negative for the local currency. The full extent and nature of President Ramaphosa's announcement will need to be analysed extensively to determine if government will have authority over the mandate of the SARB," said Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions.
 
"The rand is demonstrating severe volatility and further potential depreciation is possible. The next important trading barrier for the rand will be at the R14.50/$ level."

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