Politicians Contemplate Nationalisation of SA Reserve Bank
The Economic Freedom Fighters (Eff) have introduced an Amendment Bill to Parliament proposing nationalization of the Reserve Bank (SARB).
The Reserve Bank (in SA) which was set up in 1921, is privately owned. This is not very common world wide, though there are some other countries where this is the case. The new draft amendments propose getting rid of these private shareholders by transferring these shares to the Minister of Finance.
Many critics have immediately decried the Bill not only for lacking in setting out practical implementation but also for its knock on negative effect on the Rand and thereby the economy.
Tough Times Ahead
Economists have warned that in the wake of the recent +-10% drop in the value of the Rand (tied to international issues surrounding the Turkish Lira vs the US Dollar) and after the proposed draft Bill the Rand will continue to be repressed and this will soon translate to petrol and food price hikes.
Parliament is also discussing removing property without compensation and this has had negative effects in regard to investment and some companies are already scaling back operations (such as mining operations) in an effort to hedge their bets and any possible losses in the future should any of these bills and measures actually be implemented. Implats (Platinum miners) recently announced 13 000 jobs will be slashed. International investors do not like to put investment where it may be lost overnight.
The Rand has been hard hit recently, not only spiking up over R15 to the Dollar but also losing some of its recovered ground in the wake of recent political maneuvering. Investors enjoy stability and consistency and recent political debates such as the writing off of unsecured debts or confiscation of property without compensation make the future unclear, which leads to nervousness and concern (which has a negative effect).
As the Rand loses strength vs currencies like the US Dollar the price of fuel goes up (because you have to buy it based on a Dollar price). So even if the price of fuel in dollars stays the same it takes more Rand to equal a Dollar. This means you have to pay more for fuel. Because fuel and transport costs are factored into all sorts of aspects of food production and sales the cost of food soon goes up when the cost of fuel goes up. So a weaker Rand means food costs more. When people can’t buy what they used to on their old income they tend to also push their prices up for their products and services. This means everyone has to pay more for everything and the cost of living escalates and inflates.
If you are currently struggling to make ends meet then be aware that tough times lie ahead and you should think about getting help with your debt situation now rather than later when it may be much harder to solve your issues. Why not go talk to a local Debt Counsellor and discuss how you can improve your situation without having to earn more?