There has been much discussion in the media about the private shareholders of the South African Reserve Bank following on comments by the Secretary-General of the Governing Party Mr Gwede Mantashe. There still appears to be a lot of uncertainty notwithstanding a press release by the Bank on 25 January 2010 to clarify the matter.
To put my remarks in perspective, the central banks of, among others, Italy, Japan, Pakistan and South Africa, are institutions with shareholders other than their respective governments.
The Bank is an institution created by statute, with the status of an independent legal person, which may not be liquidated other than by an Act of Parliament.
Its independence is entrenched in the Constitution and it is not owned by anyone but by South Africans. In that sense it belongs to the country as a whole and control of the SARB is exercised between its shareholders and Government in a manner whereby the latter, in normal circumstances, may exercise ultimate control over the SARB. Furthermore, the SARB Act does not grant shareholders any authority to remove directors. By virtue of the fact that the Bank is a statutory institution, the shareholders are also unable, by means of a resolution or otherwise, to amend or change the Bank’s constitution.
The SARB Act determines that the Bank shall be managed by the Board and that the Governors and Deputy Governors must devote the whole of their time to the business of the Bank. The Board consists of a Governor, three Deputy Governors and three other directors, all appointed by the President of the Republic (after consultation with the Minister of Finance and the Board), and seven other directors, appointed by the shareholders.
Individual shareholders are prevented from exercising undue influence over the control of the SARB by virtue of the prescription that no shareholder may hold more than 10 000 shares in the Bank. They also receive a fixed dividend at a rate of 10 cents per annum on the value of their shares held, provided that profits are realised. Voting is restricted to one vote for every 200 shares held, with a maximum of 50 votes per individual shareholder, which votes may be exercised at meetings of shareholders of the Bank.
The concept of shareholding in the Bank is based exclusively on principles of shared community representation and participation in the oversight of the Bank, for purposes of increased independence, transparency and accountability, in the ultimate interest of the general public of the RSA. SARB shareholders should therefore at all times exercise their powers in accordance with these principles and avoid any actions that could be construed as an attempt by them to abuse their undue powers for purposes of self-interest and own enrichment.
The Bank has a unitary board structure.
When the Bank was established in 1921, the majority of central banks worldwide had private shareholders (or ‘stockholders’ as they were occasionally called). A similar structure was introduced in South Africa.
Internationally, however, this approach has changed since the 1930s. Nationalisation of central banks during the period of economic hardship in the midst of the Great Depression commenced with the nationalisation of the central banks of New Zealand in 1935 and Denmark in 1936. After World War II in the wake of state ownership of key industries in numerous countries nationalisation of central banks continued.
The structure of shareholding in the Bank has however not been amended since its inception and it is a juristic person in terms of its own Act.
The South African Reserve Bank and seven other central banks (Belgium, Greece, Italy, Japan, Switzerland, Turkey and US) have shareholders other than the governments of their respective countries.
The Bank currently has some 650 shareholders. Shares were delisted from the JSE on 2 May 2002 as amendments to the listings requirements of the JSE made continued listing impossible. Since delisting, the shares are predominantly traded on an over-the-counter trading and transfer facility. Except for the provision of the Act that no shareholder shall hold, or hold in aggregate with his, her or its Associates, more than 10 000 shares of the total number of 2 000 000 issued shares, there are no other limitations on shareholding. The dividend payable to shareholders is limited to 10c per share per annum (in total R200 000 per annum).
The Bank annually holds an ordinary meeting of shareholders at its Head Office building in Pretoria. On this occasion the Governor, as Chairperson, delivers an annual address on matters covering the state of the economy, certain aspects of monetary policy and the operations of the Bank. At this meeting the Bank tables a comprehensive "Annual Report" on its operations and finances for approval by shareholders. The "Annual Report" also contains a discussion of monetary policy.