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South Africa nationalization risk

18 July 2019 Langelihle Malimela

South African President Cyril Ramaphosa on 11 July reappointed Lesetja Kganyago as governor of the central bank for a second five-year term starting from 9 November. The reappointment comes after the South African Reserve Bank (SARB)'s role has been publicly challenged by factions of the ruling African National Congress (ANC).

Those aligned to former president Jacob Zuma and espousing radical economic transformation have sought immediate implementation of a 2017 party resolution to nationalize the central bank. On 4 June 2019, they also called for revision of the SARB's mandate to maintain an inflation rate within a 3-6% target range, calling instead for it to address problems of low economic growth and high unemployment. Ramaphosa, Finance Minister Tito Mboweni, and Kganyago subsequently defended the SARB's independence and emphasized that its mandate would not change.


Ramaphosa has stated that, although officially ANC policy, the SARB's nationalization is unaffordable and not currently possible given South Africa's weak economic position. He has also been adamant about the SARB's independence in determining interest rates. Kganyago has been a strong ally of the president in this regard, criticizing those calling for a revision of the SARB's mandate as failing to understand how the institution works.

Kganyago is the current International Monetary and Financial Committee (IMFC) chairperson at the International Monetary Fund, strengthening his international credibility. Since his original appointment as SARB governor in November 2014, he has succeeded in keeping South Africa's inflation rate within its target range, despite periodic pressure to relax this during Zuma's term of office. His reappointment indicates that the SARB is very unlikely to revise its inflation target range over the next five years and points to policy continuity, as he is also unlikely to yield to political pressure, regardless of the policy conflicts within the ANC. While very unlikely, a successful drive to remove Ramaphosa from office at the ANC's National General Council in 2020 would threaten Kganyago's position and revive the likelihood of both the nationalization of the SARB and the revision of its mandate.

Posted 18 July 2019 by Langelihle Malimela, Senior analyst, Country Risk – Africa, IHS Markit


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