Explainer: What will nationalising the Reserve Bank really mean?

Explainer: What will nationalising the Reserve Bank really mean?

- The issue of nationalising the Reserve Bank has received much attention and divided the ANC

- Not everyone agrees that the policy will be successful, however

- At worst, it could have a harsh impact on South Africa's economy

The issue of nationalising the Reserve Bank had divided the ANC in recent weeks, with Ace Magashule coming out in support of the policy while others like Cyril Ramaphosa have assured the public that the move will not happen.

But what exactly is the Reserve Bank and what does it do? And how will nationalising the institution change things?

The main function of the Reserve Bank, according to the constitution, is to "protect the value of the currency in the interest of balance and sustainable economic growth in the Republic".

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In order to ensure transparency and to guard against conflicts of interest, the Reserve Bank is controlled by private shareholders who do not have any direct influence over monetary policy. 

At the ANC's 2017 Nasrec elective conference, however, the party said that it wanted the Reserve Bank to be 100% controlled by the government and pursue a "flexible monetary policy" - an idea that initially came from the EFF's Julius Malema. This would likely mean that control of the Bank would shift from the shareholders to the finance minister.

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But there some doubts that nationalising the Reserve Bank would actually make a difference. Economist Richard J Grant, for example, argues that such a move would be at best cosmetic and produce little real change, and at worst it would weaken the rand, slow economic growth and lead to job losses.

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Others have pointed out that buying out the Reserve Bank from its shareholders would be expensive - especially at a time when state coffers are already under a lot of strain.

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Source: Briefly.co.za

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