Rand takes a hit after proposal to nationalise the Reserve Bank

The South African rand took a big hit on Wednesday following the ANC’s announcement that it has agreed that the South African Reserve Bank should be nationalised.

The currency dropped to R13.40 to the dollar after the news hit media outlets – a 1.7% decline from R13.18 when markets opened on Wednesday.

This marks the fourth big drop in the currency in as many days. The rand also lost value against the euro and the British pound.

• 1 USD in ZAR – R13.40 (-1.7%)
• 1 GBP in ZAR – R17.29 (-1.5%)
• 1 EUR in ZAR – R15.16 (-1.3%)

ANC economic transformation subcommittee head, Enoch Godongwana said that it was an anomaly that an institution like the Reserve Bank should be in private hands, and that the independence of the Reserve Bank would be guaranteed in state hands.

Analyst at Nomura, Peter Attard Montalto said that removing private shareholders would have no immediate effect on policy, though it could be seen as symbolic.

“It would be seen as a step toward greater direction of policy and shifts in mandate,” he said.

In a note before the ANC’s policy conference launched, Attard Montalto warned that the SARB’s independence would definitely come under the spotlight, as supporters of president Jacob Zuma moves to secure funding.

“The Zuma faction within the ANC sees the SARB as a blockage to more radical transformation within the financial services sector, including allowing banks to maintain too tight a set of credit standards that is seen as restricting credit from black SMEs and black industrialists, as well as not applying enough pressure to banks on black ownership and black management criteria,” the analyst said.

“The SARB is also, through its systematic imposition of a consistent rules-based system, seen as a blockage against bank ownership by politically connected parties and a frustration at its application of exchange controls in the same vein.”

Read: Why the Reserve Bank’s independence is being threatened now