The Governor of the South African Reserve Bank (SARB), Lesetja Kganyago, yesterday briefed parliament on the SARB investigation into allegations that President Ramaphosa contravened Exchange Control Regulations by holding US dollars at his farm for a period exceeding legislated limits. Screengrab. Parliament Youtube channel
The Standing Committee on Finance was briefed by the South African Reserve Bank (SARB) and the Prudential Authority (PA) on their annual reports on Wednesday.
SARB Governor Lesetja Kganyago said that the poor were the most affected by high inflation in the country.
“Inflation by far has been the highest for South Africa’s most vulnerable. We use Stats SA data, and according to this data, if you break the income deciles, you will see that the poorest decile is experiencing high inflation. Inflation is at 4.7 percent, and the higher income earners are experiencing inflation that is lower than overall inflation,” the governor told members of Parliament (MPs).
The SARB has been on an aggressive interest rate-hiking drive since the pandemic ended, with the Monetary Policy Committee (MPC) deciding to keep rates the same at their last meeting.
The central bank left the repurchase rate unchanged at 8.25 percent in July after hiking rates 10 consecutive times.
Kganyago said, however, that the rate hikes had been manageable for households.
“Household debt had remained contained. The average for household debt service costs from 2010-2019 averaged 8.6 percent, and we are at 8.4 percent. Yet households are still feeling the pressure, from what we have seen with inflations and the responses thereof,” he said.
The governor also warned that economic growth for the country was not expected to grow at the rate predicted by the finance minister in his budget speech held earlier this year and that it would have to be revised in the Mid-Term Budget Policy Statement.
Momentum Investments economist Sanisha Packirisamy told Business Report that the last bout of inflation had hit lower-income workers harder given that the main areas of inflation pressure were food and transport.
“With food accounting for 40% of the wallet spend of the bottom 30 percent of South African earners, it was imperative to hike interest rates to stem inflation expectations and to contain second-round pressures, which could have become more entrenched in the economy.
“The SARB will consider a number of factors going into the next interest rate meeting. If inflation continues to track closely to the SARB’s expectations of meeting the midpoint of the target band on a more sustainable basis by the middle of 2025, then it is likely that we have seen the last of the hikes in the current cycle,” she said on the bank’s upcoming decision on interest rates.
Packirisamy said Momentum expected the first rate cut in the second quarter of 2024, with the pace and extent of cuts being guided by the downward trajectory of inflation towards the midpoint of the target on a more sustainable basis.
Kganyago was then the main target for MPs when he elaborated on the Phala Phala matter.
The bank stuck to its guns on the matter.
This comes after the SARB last week published limited findings of its investigation into the matter on August 21, where the matter was seemingly set aside on a technicality.
The investigation focused on the Phala Phala buffalo sales transaction that took place before the alleged theft of millions in foreign currency.
The biggest talking point has been the source of the money since the scandal broke, with the president claiming last year that it came from a typical sale on the farm, where Sudanese businessman Hazim Mustafa purchased 20 buffalo.
Mustafa said he paid $580 000 (currently R10.8 million) for the buffalo, which were not delivered, and the SARB said that this made the sale null and void as it was not completed.
The questionable way in which the money was allegedly kept raised eyebrows after Arthur Fraser opened a case with the Rosebank police in June last year.
However, after a similar report by the acting public protector, the SARB said it found that, based on the facts available, there was no violation of the country’s exchange control laws because there was no “perfected transaction” to require a declaration on the part of the farm.
The report by the SARB would not be made public, as the governor said that this would be unlawful.
Kganyago said that the central bank treated its mandate seriously.
“We were satisfied that our team acted professionally and without fear or favour. Our responsibility was to focus on the possible exchange of money and we focused on the laws that we administer. We are not responsible for the port of entry, that would be Sars (SA Revenue Service).
“Sars has already pronounced the declaration of this money. We do not have the power that customs officials have, it is the responsibility of them,” the governor said while answering probes by MPs in Parliament.
“We were not investigating a crime, we were investigating exchange controls,” he further said.
The bank’s findings on the matter was, “On the facts available to it, the SARB finds that there was no perfected transaction and thus the SARB cannot conclude that there was any contravention of the exchange control regulations (the applicable regulation is regulation 6(1)) by Ntaba Nyoni Estates CC (the entity involved) or, for that matter, by the president. That is because the SARB has concluded that the transaction in question was subject to conditions precedent which were not fulfilled, and therefore there was no legal entitlement, within the meaning of regulation (6)(1), on the part of Ntaba Nyoni Estates CC, to the foreign currency.”
Kganyago said the mere possession of foreign currency was not what was regulated in terms of the exchange control regulations.
“Any cash upon entry into the country needs to be declared to Sars,” Kganyago further added.
The majority of the MPs present did not agree with the bank’s conclusions from the report, with many saying that they would be taking the matter further.
Earlier this week, Economic Freedom Fighters’ leader Julius Malema said the report by Kganyago was a fallacy aimed at protecting Ramaphosa.
Malema said the party would take the report under review, adding that the SARB has found that no exchange control laws were violated in the reported “transaction” between Ramaphosa’s Phala Phala farm and the businessman for the 20 buffalo.
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