[Letter] Nationalising the Sarb won’t solve unemployment, energy insecurity

Changing the mandate of, and possibly nationalising, the SA Reserve Bank (Sarb) is unlikely to solve the major problems afflicting South Africans, especially unemployment and energy insecurity.

Speaking after the ANC’s latest policy conference, ANC economic transformation committee chair Mmamoloko Kubayi indicated that the bank should assist in supporting employment and contributing to job growth. But changing the bank’s mandate would not remove the inefficiencies and higher costs across the country’s ports, rail and roads, all of which drive up prices.

Nationalising the Reserve Bank will not improve labour-market legislation and policies, or speed up electricity generation and distribution reforms. Amending the bank’s mandate will not mean that cost-increasing localisation master plans are not imposed.

The rand performs well when commodity prices are higher, but the country lacks the necessary growth fundamentals to ensure the future strength of the currency to a significant extent. Weakness has already been priced in.

Moving so far as to nationalise the Sarb — simply discussing the possibility — sends a signal to South Africans and international companies and investors that the respected institution, and in turn the currency, may yet lose all credibility in future.

In the context of global growth declining and investors moving away from some emerging markets, this is the last signal SA should be sending out.

Changing the Reserve Bank’s mandate to allow the institution to prevent government from increasing administered prices would be a welcome change, but it is unlikely that the ANC is considering this particular mandate change.

Letter originally appeared here.

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