Take this to the bank
NECESSARY: DISCIPLINE AND BRAVERY
The level of undue influence seen in SOEs would be the first thing that needs to go.
It’s one thing to present problems and identify shortcomings, but one also needs to propose solutions if we hope to grow and move forward together. In a previous column I may have suggested the nationalisation of certain assets is not in the best interests of our country.
While that is partially true, it is not to say that nationalisation could never work in South Africa. In fact, the article was intended to highlight the dangers of poor implementation of such a plan.
Let’s look at what it would take to make this a successful endeavour and whether the positives outweigh the negatives.
To do this, we must first define what would constitute nationalisation. This would essentially be the government becoming the majority or sole shareholder of the central bank and the removal of private shareholders.
What would change under nationalisation?
In terms of governance, very little. Currently, the governor is appointed by the president. Most state-owned enterprises (SOEs) have their boards appointed by the public enterprises minister. And we all know how well that’s been going.
In terms of mandate, nothing. The central bank’s mandate is outlined in Section 224 of the constitution. This means a substantial change to the mandate would require a change to the constitution, not just to the ownership of the entity, and a twothirds vote in parliament backing it. In terms of private influence, zilch. Private shareholders have absolutely no say in the operational running of the central bank. In fact, the only benefit of being a private shareholder is the limited dividend earned that can never exceed R1 000 and the voting rights to appoint the seven non-executive members of the central bank’s board (who are also not involved in the bank’s daily operations). In terms of ownership, everything. Though the government would become the owner of the bank, this wouldn’t come without complexity.
The most complex of the issues would be agreeing on a fair price to pay to acquire the shares from the current shareholders.
Contrary to popular belief, the government would not simply take back the shares at no cost; there would be a sale of shares like any other entity.
Non-negotiables needed for success
The level of undue influence seen in SOEs is the first thing that would need to go. Ministers appointing candidates in their own time and refusing to account for the state of entities in parliament are not the kind of shareholders that would inspire confidence.
The next would be the notion that printing money would solve problems. This would be the quickest way to reduce the country to zero.
What many fail to understand is currency protection is about more than just ensuring an acceptable trading rate; it underpins everything. Salaries, housing, car and food prices – everything you transact on would require you to have more money in a devalued economy.
And employers would not be obligated to pay you more simply because the country elected to print more money.
Advantages it would bring
Strategically, very few. Looking at the Bank of England as an example. The bank is nationalised; however, it continues to operate independently.
So, should we nationalise? It seems the more relevant question may be whether we are capable of achieving true nationalisation with the political leadership that exists within the country.
Is there a leadership disciplined and brave enough to put the needs of the people above the self-interest and enrichment of a few?