SARB debate unlikely to affect independence - economist | Fin24
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SARB debate unlikely to affect independence - economist

Jul 07 2017 19:09
Liesl Peyper

Cape Town – Although the ANC at its recent policy conference bemoaned the fact that the South African Reserve Bank (SARB) is privately owned, changing this is unlikely to affect its independence or monetary policy in general, says BNP Paribas economist Jeffrey Schultz in a company note.

“The tabling of a proposal to nationalise the SARB rattled markets and the currency … [but] the SARB’s mandate is set out in the constitution with direction from National Treasury. So while there’s a risk of more public sector participation (or full nationalisation) in the bank’s shareholding in the coming years, its shareholders have no sway in setting monetary policy.”

On Wednesday when the news reached the markets, the rand fell by about 1.5% to R13.45 against the dollar, but pulled back to R13.38/$.

READ: Rand knocked as ANC proposes nationalising Reserve Bank 

The ANC’s five-day policy conference was of particular interest to investors, Schultz says, but it was never likely to produce clear-cut outcomes.

Land expropriation

Key questions around land expropriation – with or without compensation – as well as the Reserve Bank issue and the controversial new Mining Charter remain unanswered.

President Jacob Zuma has on a number of occasions called for constitutional change to enable government to expropriate land without compensation.

“Despite fierce debate (during the policy conference), there seems to be some acknowledgement of the potential risks of pursuing constitutional change … as it refers to property rights,” Schultz says.

New Mining Charter

ANC economic transformation commission chair Enoch Godongwana said although the ruling party agrees with the black shareholding targets set out in the Mining Charter, it disagrees with the “design” of the document.

The third Mining Charter wiped off billions in the value of mining stocks when it was released on June 15, and sparked fear of further disinvestment and job losses in an ailing industry.

READ: ANC wants urgent meeting with Zwane over Mining Charter 

The charter was severely criticised by analysts, legal experts and industry stakeholders, including the Chamber of Mines which submitted a court application to interdict its implementation.

The ANC also raised concern over its potential impact on the industry and employment numbers, and subsequently met with the chamber to discuss its concerns.

White monopoly capital

“Importantly, the notion of ‘white monopoly capital’ was toned down, with the focus less on the ‘colour’ of the capital but rather on contesting monopoly capital in all its forms,” Schultz says.

This means that the faction associated with presidential hopeful Nkosazana Dlamini-Zuma has lost the argument, as they wanted the party to declare white monopoly capital as “the enemy”.

Compromise outcome at leadership conference

Schultz says although former African Union (AU) chairperson Dlamini-Zuma, who held a number of cabinet posts prior to her AU leadership position, is still the frontrunner to win the December elective conference, her position may not be as strong as initially thought.

“A victory for Ms Dlamini-Zuma would be likely to be seen by markets as signifying broad policy and leadership continuity with the current government.”

He points out though that even if Deputy President Cyril Ramaphosa is elected instead, this may be based on compromises, such as that he may be compelled to appoint a pro-Zuma deputy.

READ: ANC seeks leadership deal to avoid split 

Markets may interpret this as having negative implications for growth and policy certainty.

“The prospect for a ‘compromise’ outcome at the national conference in December now looks more likely than before,” says Schultz, “which may include an expanded ANC leadership structure in terms of senior party posts.”

Such an outcome however would do little to improve policy implementation and boost growth prospects.

“The ANC as a whole tends to veer back to its more conservative roots when the going gets tough,” Schultz says, “but we think noise levels (around radical constitutional change and market-unfriendly policies) are a lot higher and riskier than before.” 

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