Newspaper Contribution

BoN not worried about SARB nationalisation


15 Apr 2019

Central bank deputy governor, Ebson Uanguta has said that the bank is not worried about calls by South African president Cyril Ramaphosa to nationalise the partly private owned South African Reserve Bank despite the economic link between South Africa and Namibia.

Speaking at the side-lines of the monetary policy announcement this week, Uanguta said the issue of nationalisation of the SARB was theoretical and that it has no practical impact on its operations.

He emphasised that despite the rand being one of the most volatile currencies in the global economy, any move by the South Africans to claim sole ownership will not affect it, thus the Namibian dollar will not be swung.

“Nationalisation implies that the bank will have government as its sole shareholder and that is the case with many other countries. But the bank’s shareholders do not mean anything and have no influence over affairs of the SARB.”

As far as price stability and inflation targets are concerned, these are given over to treasury to handle which in turn gives the function to the central bank which will look at how these will be achieved, he added.

He also said there was no reason to laud the South Africans for attempting to nationalise because ownership remains immaterial.

In the same breath, senior local economic experts have also expressed confidence that a possible nationalisation of the SARB will not negatively impact the domestic economy or the Bank of Namibia’s monetary policy.

Although discomfort over the 2 million shares ownership at the bank was expressed by the Economic Freedom Fighters lately, calls for the nationalisation of the South African apex bank have reached fever pitch and are now at the centre of President Ramaphosa’s election campaign sloganeering.

According to available information, the South African Reserve Bank houses more than 700 shareholders from all over the world with Germans holding the highest number of shares.

“We have a situation where we have external shareholders. This has been done by a number of countries around the world.  There are some six countries in the world that have external shareholders in the bank, and we are one of them. The Reserve Bank should be owned by the people of SA, not external shareholders,” Ramaphosa said last week Thursday at a parliamentary question-and-answer session.

The potential ramifications of this on the Bank of Namibia’s monetary policy came out as a major concern soon after these utterances, considering the common monetary area within which Namibia and South Africa find themselves.

Leading economist at the Economic Association of Namibia, Klaus Schade allayed fears of the nationalisation drive stating that everything should be business as usual as long as the autonomy of the bank was ensured.

Said Schade, “Nationalisation implies that the state is the sole shareholder of an enterprise. The state is the sole shareholder of the Bank of Namibia as is the case with most central banks. What matters more than the ownership is whether the autonomy and independence of the central bank is guaranteed and whether the central bank can pursue its mandates without political interference.

In the case of Namibia and other central banks their autonomy is guaranteed. South Africa has also committed herself to an autonomous, independent central bank in the SADC Finance and Investment Protocol. A change of ownership does not imply that this independence is under threat,” he voiced. Responding to Ramaphosa’s utterances, the Mail and Guardian also emphasised that even if the SA government were to take over, the shareholder’s power does not extend to making any decisions on policy.

“When shareholders attend the annual general meetings, they have the power to elect seven non-executive directors. At these meetings, they can also discuss the bank’s annual report and the auditors’ report,” said the publication.

Trends over the years have shown that South Africa’s monetary policy stance has always influenced that of Namibia and the overall economy.

Author on economics, Dr. Ravinder Rena has echoed that the dynamic relationships of trading between Namibia and South Africa, more specifically the  volatile  nature  of the rand and interest rate have influenced consumers to absorb short-run price changes.

His latest research on the impact of South African monetary policy on Namibia discloses that a one percent  change  in  South  Africa  money  supply  or appreciation  (depreciation)  of  rand  leads  to  double  change  in  beef  price  in  Namibia.

“Due  to  the linkages between monetary policy variables and  relative  agricultural prices, it  is recommended  that agricultural policy makers  and monetary  authorities  in CMA  need to work  closely in  designing  and implementing  monetary  policy.  This is important  because  monetary  policies  meant  to  stabilise  the  economy may have less desirable impacts on farmers and consumers, especially in the short run,” he says.

The Bank of Namibia has also recently expressed that it had no plan to de-link from the South African Rand in the short to long term, further cementing the fate of the local economy to that of its southern neighbour.

Former director of research at Namibia Equity Brokers, Alfred Kamupingene also echoed the sentiment saying that the nationalisation drive may “provide some leeway to do things differently”.

“I think the nationalisation idea in principle could be a good idea in that currently there are divergences in terms of national objectives which have to be aligned,” he said.