Expensive, but just symbolic
Will government fork out thousands of rand per share to nationalise the SA Reserve Bank?
Government could part with thousands of rand to buy even a single share in the SA Reserve Bank if the ANC national executive committee (NEC) finalises the party’s elective conference resolution to nationalise the central bank.
With the finance ministry already scrambling to plug a possible R50bn revenue shortfall and find funding for President Jacob Zuma’s free education drive, this could place SA’S already strained public finances under severe pressure, given that the Bank has 2m shares.
At its 54th elective conference in December, where Cyril Ramaphosa was elected president, the ruling party commanded government to nationalise the Bank in a manner that would not “benefit private sector speculators”.
Asked to explain what this means, party representative Khusela Sangoni was cagey. “Wait for the NEC to process, finalise and release the resolutions of conference,” she said, without providing any timelines.
Tito Mboweni, a member of the NEC and former governor of the Bank, who, according to its shareholder index, owns 10,000 shares in it, referred questions to the
Bank.
The Bank itself says nationalising the institution would be expensive. “Shares trade at present for much less than the price at which some shareholders are willing to sell their [stakes],” says a spokesman. “The ‘buying-out’ of shareholders will therefore result in the payment of large sums of money to effect cosmetic changes — it will have no bearing on the manner in which the [Bank] carries out its mandate or executes its policy responsibilities.”
On Monday this week, buy and sell transactions on the Bank’s over-the-counter market were failing to match, as the highest amount buyers offered was R10.99/share, while the lowest sellers were willing to go was R10,100.
At a midpoint rate of R5,055.50 for each share, the state would face a bill of just over R10bn to nationalise the Bank. If the shareholders decline to meet government halfway, and insist on their asking price, the bill rises to R20bn.
“The state could afford the R20bn,” says John Ashbourne, Africa economist at Capital Economics. “That is only about 0.4% of GDP, or 1.4% of total government spending. It wouldn’t really change the headline figure that much.
“The outlook will be pretty bad either way.”