Mangosuthu Buthelezi’s Online Letter
Dear friends and fellow South Africans,
My stand against the nationalization of mines has drawn both criticism and applause. I am pleased that it has made people think. Yesterday I was invited to debate the issue on SAFM’s "Morning Talk", during which listeners were encouraged to call in with their comments and questions.
During the debate a question was raised over why the IFP supports the nationalization of the Reserve Bank, when we are so vehemently against the nationalization of mines. This was misunderstood as a contradiction in policy. The importance of this debate impressed upon me the need to speak about the difference between these two issues.
I noted during "Morning Talk" that Government has yet to prove that it is capable of running a business efficiently and even profitably. When I was in Cabinet for ten years I witnessed the depth of financial distress of State run industries, like SAA, which should have been turning over a sizeable profit. SAA consistently required a financial bailout, just as Denel did, for it was operating at a loss.
Then there is Eskom, which has admitted that it still requires an additional R200 billion in funding and has no plan to meet its costs beyond 2017. We can only pray that Parliament will not agree to further tariff increases, for already electricity has gone beyond what many South Africans can afford.
Year after year, Government’s parastatals are failing. There is no reason to believe that Government would do a better job running South Africa’s mines than the private sector. Instead there is good reason, and precedent, to believe that it would do so less efficiently and less profitably. There is also the looming threat of corruption, which has become so endemic within the State.
The question of how mines could be nationalized has also taken a back seat to the debate on whether or not it should be done. One caller yesterday asked an incisive question: where will the money come from to buy out the current shareholders, or is the intention to take over the mines without compensation? This latter option would leave the international community looking at South Africa with deep concern and not a little contempt.
During the State of the Nation debate earlier this year, I committed, as an opposition leader, to supporting the President whenever he does the right thing. The President’s failure, I said, would be the failure of South Africa. As a patriot, I must therefore hope for the President’s success.
It is discouraging then to hear the President speak from both sides of his mouth when it comes to the nationalization of mines. With one breath he assures that this is not Government policy, while with the next he declares it is open for debate. There is discord within the tripartite alliance over this issue, which does not bode well for the integrity of the leadership of our country.
The issue of the nationalization of the Reserve Bank is a whole different kettle of fish.
The Constitution describes the South African Reserve Bank as an organ of State and requires it to be such. Yet SARB remains a fiefdom, acting in the interests of a small club. The strength of the Rand, in spite of both the Ministers of Finance and of Trade and Industry agreeing to the Rand having to be devalued, proves the truth of this statement.
Chapter 13 of the Constitution describes the primary objective of SARB as protecting the value of our currency "in the interest of balanced and sustainable economic growth". As an organ of State, SARB should be entirely dedicated to pursuing solely the public interest.
But SARB is owned by private shareholders, whom the Reserve Bank Act requires be kept secret, even though the law of the land forces all shareholders of all other companies to be disclosed in a public record. The private shareholders elect half of SARB’s Board of Directors. Both the shareholders and the half of the Board of Directors they express represent private interests, while the Governor and the other half of the Board appointed by Government should represent and pursue the public interest.
Thus, for SARB to fulfil its Constitutional mandate, it would need to disregard the interests of all its shareholders and half of its Board of Directors. This is in conflict with its statutory rules of corporate governance.
The decisions which SARB takes in respect of interest rates and exchange rates have immense effects both on the economy and the people of South Africa. SARB’s policies on exchange rates can make or destroy the entire export-oriented manufacturing sector. According to several submissions received in the Portfolio Committee on Trade and Industry, they have in fact destroyed a great portion of it.
By increasing or decreasing interest rates, SARB decides how much people are to pay on their home loans, corporate debts, lines of credit and credit cards. Their power ultimately determines employment levels and the success of the economy. Therefore SARB holds in its hands a power much vaster than any law Parliament may adopt.
Yet this power is exercised behind closed doors in the Monetary Policy Committee which includes no political representative, civil servant or member of the public. The Committee has no public records of its discussions and there is no channel of accountability to Parliament for any of its decisions. SARB has historically operated within a climate of secrecy. This is particularly difficult to accept in respect of its having been delegated executive powers in respect of the implementation of laws such as the Exchange Control Act.
On several occasions before courts of law SARB has claimed not be an organ of State. In its procedures it has avoided applying basic criteria of administrative justice and fairness and to deal with the public directly.
SARB seems to disregard the precepts of the Promotion of Administrative Justice Act. Its decision-making is secretive and never on record and its decisions tend to escape judicial review. This has enabled the perception to be created that it favours friends of the banking elite and opposes its foes.
None of those working at SARB are civil servants or subjected to any laws of fairness, transparency and accountability provided for in respect of the civil service. They are also paid astronomically higher than civil servants.
But the fundamental problem is that SARB is not fulfilling its Constitutional mandate, for it is not acting in the best interests of balanced and sustainable economic growth. That would require it to devalue the Rand and decrease interest rates. Instead, SARB has yielded to the interests of banks and the financial sector which benefit from a strong Rand and higher interest rates.
When the IFP determines its policies, we consider what is in the best interests of South Africa, what the Constitution requires and whether our decisions now will serve the next generation. Far from being contradictory, our policy on nationalization meets this standard.
Yours in the service of the nation,
Prince Mangosuthu Buthelezi MP
Liezl van der Merwe, Press Officer to Prince Mangosuthu Buthelezi MP, on 082 729 2510.