South Africa 17.8.2018 10:25 am

Malema’s bill to nationalise Reserve Bank makes private shareholders disappear

Julius Malema. Picture: EFF/Twitter

Julius Malema. Picture: EFF/Twitter

Peculiarly, the EFF leader’s plan involves neither the buying nor expropriation of private shares, instead seeking to write these shares out of existence.

Julius Malema has submitted his draft law to nationalise the SA Reserve Bank (Sarb) to parliament, according to Business Insider.

His desire to see the Reserve Bank nationalised has left some wondering how this would work in practice.

While some believed it would have to involve either the buying or expropriating the shares of private owners of the Reserve Bank, Malema’s solution is simpler than that.

Malema’s bill repeals the major sections of the South African Reserve Bank Act dealing with private shareholders, deletes provisions regarding what would happen in the event of liquidation of the bank and replaces the word “shareholders” with “the minister”.

Effectively, this sees the bill writing private shareholders out in an apparent attempt to make them disappear from South African law. Whether this is the case or whether what will happen to private shareholders has not yet been addressed in this draft of the bill is unclear at this point.

Also peculiarly, Malema notes the financial implications for the state as “none” in a memorandum attached to the bill.

Nationalisation of the Reserve Bank has been a long-time aspiration for both Malema and his party.

“The general practice in the world is that governments own their reserve bank. South Africa is one of the two if not three that do not own their own reserve bank,” he said back in 2013.

Earlier this year, the EFF reintroduced the idea into the national debate, saying the current ownership structure has resulted in foreign private shareholders with no patriotic interests and commitment to South Africa having a stake in the bank.

READ MORE: ANC, EFF call for state ownership of SARB

While they may be enemies on some issues, the ANC and EFF are in agreement over this one. The governing party resolved at its national conference in December that the Sarb should be 100% state-owned.

This puts the two parties at odds with Reserve Bank head Lesetja Kganyago, who has warned that he believes nationalising the central bank would be a costly exercise that would take time and not necessarily produce the desired results.

At the Reserve Bank’s AGM in Pretoria at the end of July, he told Business Times that he did not believe nationalisation was a good idea.

“Getting rid of private shareholders would not necessarily improve governance,” said the economist.

“Experience has taught us that boards approved by government are no guarantee of good governance, nor are they a guarantee that decisions will be taken with the interests of the broader economy,” he continued.

Kganyago mentioned a group of shareholders who he says are lobbying for the bank to be nationalised, seeing it as an opportunity to make a killing at the taxpayers’ expense.

“This for what would, at best, be a cosmetic gain,” he said.

Malema’s draft bill can be read in its entirety here.

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