JJ TABANE | Has the Reserve Bank been compromised?

The drafters of our constitution introduced institutions meant to be independent enough to create checks and balances to avoid the abuse of power. When these clauses, such as in chapter 9 of the constitution, the assumption was that while independent, these institutions would be appointed by a credible government that has integrity.

This explains the extraordinary powers given to the president — to appoint the commissioner of Sars, the head of the NPA, the Reserve Bank and the public protector. Once the head of state is compromised in any way, these institutions, somewhat beholden to the president, are slowly compromised. We saw this under former president Jacob Zuma, but it is slowly happening under President Cyril Ramaphosa.

The political pressure on these institutions is clearly unbearable, and resistance to such pressure is not sustainable. The only way to cure such a dangerous compromise is a change of guard. Once a government can no longer be trusted to protect the independence of institutions that reinforce democratic accountability, everything becomes a slippery slope.

I never thought I would see the day when I questioned Lesetja Kganyago, and the Reserve Bank, with his track record of resisting political pressure. As far back as 2017 the tripartite alliance has made noise about the ownership of the bank. These have been largely ignored by Kganyago and his team. The Reserve Bank has largely stayed the course of independence. But only the naive will ever think the bank is totally free of political influence. Former Reserve Bank governor Tito Mboweni was fired when there was no reason to do so, simply because he was not seen as a Zuma man.

When the new regime came into office the captain of that ship also changed. We were all collectively naive to believe that in the face of clear transgression the Reserve Bank, under a political appointee such as Kganyago, would find that there was something untoward with undeclared dollars in a couch. Kganyago and his team instead concocted a new reality called “perfected transaction”. So if you have dollars under your mattress and the goods you sold are still unclaimed for months, you will be OK with the bank. In one fell swoop, Kganyago has toyed with his credibility and reputation built over the years. But maybe the bank has always erred on the side of political correctness and we are the ones who have turned the blind eye.

A few examples come to mind:

• The Reserve Bank is one of the most silent institutions when it comes to the lack of transformation in the financial sector. With its regulatory mandate, is it too much to ask to make sure banks over which it has oversight are transformed? No-one has ever asked about its transformation agenda. It seems happy not to transform its own structures despite calls from across society. Instead, the Reserve Bank governor dismisses anyone characterising the bank’s approach of inflation targeting as neoliberal. He sees this as a personal insult. The reality is, he is not telling us anything original beyond parroting Trevor Manuel’s 1996 class project.

• If anything, the bank is seen as anti-transformation and making it impossible for black players to enter the financial sector. The barriers to entry have been so impossible that it’s no wonder there have been so few credible black banks or financial institutions that have thrived since 1994. While Nigeria boasts the establishment of way more than 40 banks, we count serious banks on one hand. Our bank would rather celebrate a new coin or banknote than a new black bank established under its guidance. Just last year we had to see a budding black business called 3 Sixty Life placed under curatorship for close to 24 months by the bank as Prudential Authority under suspicious circumstances. To this day there is no cogent explanation of that action, other than that this threatened a white-dominated insurance industry.

• The trouble with South Africans is that once an institution is our favourite we turn a blind eye. Look at what happened with VBS Mutual Bank. How many people have asked the critical question, where was the central bank when such high-level looting of ordinary people’s savings was happening? When municipal funds were illegally transferred to the VBS bank against the law, where was the early warning system of the bank? Who in the bank was held responsible for the collapse of VBS? Is any official in the dock along with the VBS thieves? No-one is asking that question. I am sure there will be a clever explanation like the Phala Phala one. The VBS with savings of rural people was not good enough for the Reserve Bank to save. They would rather focus on the likes of African Bank and Volkskas. 

Look at what happened with VBS Mutual Bank. How many people have asked the critical question, where was the central bank when such high-level looting of ordinary people's savings was happening?

• To this day the bank is yet to haul Standard Bank and Absa over the coals over their role in actively colluding to depreciate the rand. Under Kganyago’s watch, South Africa has been greylisted for our poor controls of illicit financial flows. Why is no-one apportioning at least some of the blame to the central bank and its leadership? If the institutions that decide on greylisting thought our central bank knows its story, would they have so readily greylisted us? I am not prepared to believe their porous systems were not part of the consideration. I am not sure whether their report on the Phala Phala saga helps our case for the greylisting to be lifted soon.

I am sure with his clever disposition the governor can explain my confusion — the same way he dismissed Tokyo Sexwale in a joint statement with the Treasury (so much for independence) when there were allegations that the bank was used to funnel illicit funds. But it is worth remembering that the issues of integrity have to do with perceptions of financial justice. If ordinary citizens feel that special treatment is meted out to politicians even by institutions that are meant to be independent, quite frankly our democracy is on a slippery slope.

Institutions such as the Reserve Bank have to be guarded by a credible political regime that respects them. Otherwise, we are busy writing a new chapter of state capture, and this time it is gobbling up what was our last line of defence.

* Dr JJ Tabane is editor of Leadership Magazine and anchor of Power to Truth on eNCA.