Deputy president ducks and dives on nationalisation
Deputy President David Mabuza avoided answering questions in Parliament about the mooted “nationalisation” of the Reserve Bank amid wider concern that this could lead to another credit ratings downgrade.
In December, the ANC instructed the government to begin the process of nationalising the Reserve Bank.
In March, Finance Minister Nhlanhla Nene reportedly persuaded the ANC in Parliament to drop a scheduled motion on the nationalisation of the central bank at the final hour, arguing that the debate would unsettle the markets at a time when a delegation from Moody’s Investors Service was conducting an in-country visit.
Moody’s gave SA a reprieve, maintaining its Baa3 rating, one notch above junk status, with a stable outlook.
The credit-ratings agency cited the change in political leadership and the recovery of the country’s institutions among its reasons for keeping SA at investment grade. A downgrade would have meant all three major ratings agencies had SA’s foreign-currency and rand-denominated debt at subinvestment grade.
This would have triggered the country’s expulsion from the Citi World Government Bond Index and projected capital outflows of R100bn.
During a question session in the National Assembly on Wednesday, DA MP David Maynier asked Mabuza whether he backed proposals to nationalise the Reserve Bank.
Mabuza said at no stage did the ratings agencies raise concern about the central bank.
Maynier pointed out that the ratings agency had in fact registered its concern about the independence of the bank.
Moody’s said in March: “The technical strength of ... [SA’s] media, civil society and institutions, including key ministries, the Reserve Bank and the judiciary, have been critical in sustaining the country’s credit profile over time.
“However, recent years have seen a gradual erosion in the strength of some key institu- tions, with a correspondingly negative impact on economic and fiscal strength and on the effectiveness of policy making.”
Mabuza said: “It’s a new question … we are looking at the comments made by the institutions and at no stage did these institutions reflect on the Reserve Bank … they reflected on institutions that in their minds were regressing. I will not comment on the Reserve Bank, unfortunately.”
This prompted numerous points of order from DA MPs, which were overruled by speaker Baleka Mbete.
Responding to another question, Mabuza said the government wanted to build a stronger relationship with the ratings agencies. Under former president Jacob Zuma, the ANC government was often critical of credit ratings agencies.
“Our attitude towards ratings agencies will change and we understand their role. We take their comments seriously and we will address the issues they are raising,” said Mabuza.