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A R735bn fight about who owns the Sarb

Lesetja Kganyago his main concern remains to protect the regulator’s independence and mandate.
Sarb governor Lesetja Kganyago. Picture: Waldo Swiegers/Bloomberg

Lesetja Kganyago has a fight on his hands to protect the Sarb’s R735 billion of reserves.

More than eight months after the ruling African National Congress decided that the South African Reserve Bank should be state-owned, like most other central banks, the governor said his main concern remains to protect the regulator’s independence and mandate.

But also at risk may be billions of dollars in reserves and a legal brawl that could last for years.

While the 97 year-old Reserve Bank’s shares are only worth about R20 million based on the current share price, some shareholders have argued the bank’s assets belong to them and they should be compensated for that when the government nationalises the institution, according to Kganyago. Eight percent of its 770 owners are foreigners, so steps to nationalise could be challenged using bilateral investment treaties or end in international arbitration.

“This is not a fight I want to be busy with,” Kganyago said in an interview in his 32nd floor office in the capital, Pretoria. “There is sufficient emerging-market turmoil that keeps me busy. I should not be wasting my time on this thing.”

‘Paid to go’

The rand slumped to its weakest level against the dollar in two years last month as upheaval in Turkey spilled over into other emerging markets.

Some of the investors do feel they are entitled to a share of the reserves, but they are wrong, said Jannie Rossouw, the head of economics and business sciences at the University of Witwatersrand. He is a former secretary at the Reserve Bank and owns its shares.

South Africa had $50.5 billion in gross reserves at the end of July and holds about R170 billion of deposits on behalf of the state, according to central bank data.

Some shareholders “want to be paid to go away,” Kganyago said. “‘Show me the money, show me the money!’ is what they are looking for.”

South Africa’s central bank is one of a handful, including Switzerland and Japan, still owned by private individuals. However, shareholders are limited to 10 000 shares each and have no say over monetary policy. They get to vote for seven of the central bank’s 10 non-executive directors.

“Why should we be paying people who are in any case at the moment very constrained,” Kganyago said.

Trojan horse

Kganyago, the 52-year-old former head of the National Treasury, fought off a proposal by the nation’s anti-graft ombudsman last year to change the constitution to take away the regulator’s inflation-target mandate. Last month, the radical Economic Freedom Fighters political party, which has won support by vowing to nationalize everything from land to banks, tabled a bill to make the Reserve Bank state-owned.

If the law is passed, the change would be mainly cosmetic. That’s unless it’s used as a gateway to meddle with the mandate again, the governor warned.

“Is this a Trojan horse?” Kganyago said. “If it leads to a point that there’s that debate about the mandate of the bank and the independence of the Reserve Bank — check what happened with Turkey, check what happened in Argentina, check what happened in Venezuela. If you want an African example, check what happened in Zimbabwe.”


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“Should they interfere with our independence, they’ve got a fight on their hands,” he said.

The maximum price over the past six months for a Reserve Bank share, which is available over the counter since they delisted in 2002, has been R10. Investors share a maximum dividend payout of R200 000 a year.

‘Horrible investment’

The stock is a “horrible investment,” according to shareholder Dawie Roodt, the chief economist at financial services company Efficient Group. He bought his shares more than two decades ago because they allow him access to the central bank’s annual meetings, where he can speak to its managers, Roodt said.

Previous governors had an acrimonious relationship with some shareholders. Tito Mboweni accused one of disrespect in 2009 when the barefoot investor dressed in lederhosen, a traditional Bavarian garment, disrupted his AGM.

During Kganyago’s four years at the helm, those gatherings have become duller affairs that last less than an hour. If the government does become the sole owner of the bank, the meetings could be over in minutes, he said.

The central bank would prefer to leave things as they are. Should nationalisation take place, Kganyago won’t give up the nation’s assets or allow tinkering with the mandate.

“If there’s a dispute over these things, you can rest assured that we will have protracted fights in the courts,” he said. “Arbitration can rule either way, but the legal costs associated with that are going to be massive, there’s no doubt about that.”


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Throughout the ages the kings and governments tried to get full control over the banking system. They all want the power to “create money”. The kings wanted to create fame and fortune for themselves, while the ruling political parties want to buy votes. This is why the Reserve Bank has to be “independent”. Political meddling causes the delicate money printing machine to run so fast, that it explodes, sending the destructive debris throughout the economy.

The pressure on the Reserve Bank increases as citizens struggle to buy basic necessities. The record-high unemployment figures, and the rising demand for social grants, act like a battering ram on the doors of the Reserve Bank. When they fail to break down the door, they will simply elect a politician who can open the door from the inside for them. They will overrun the Governor, and then put jet-fuel in the printing press. They do not realize that they will be the first ones to be killed when it explodes. The result of a runaway printing press is famine. This is the kind of famine that is created by by man, not nature.

The whole debate about EWC is totally irrelevant in a society that creates its own hyper-inflation. The process of hyper-inflation destroys the value of all assets and leaves everybody destitute. This is the retribution for taking control of the Reserve Bank.

The useless ANC dog will be wagged by the EFF commies again on this one, just like EWC.

South Africa concerns itself with nonsense while it sinks.

This is just another reaching lunge at wh1tey, they think they are “conquering” WMC by doing this.

To call Malema “leftie” and the EFF “commies” is an insult and a deep injustice to actual lefties and commies.

If it ain’t broken don’t fix it.

Take heed and focus what you broke. Education, police, electicty, water, infrastructure…

Is it even worth commenting ?

Look a it in this way. Say this naive youngster inherits the highly successful business. His dad built an empire over his lifetime, and now it belongs to this young man. On his first morning on the job he calls all the employees to a meeting. This ignorant young man addresses the meeting and thanks everybody for their contribution over the years. He says that the current system is not fair and he will change the management style to be more democratic. Employees can now elect their bosses and the bosses can determine their own salaries. The managers will have the power to determine the wages of the workers. The managers will also be carrying the keys to the vault where all the cash and bonds are kept.

If the majority of workers are unskilled, how safe will the cash and assets in the vault be? How long will it be before the workers elect the manager who promises them the highest wages and extra benefits from the vault? The competitors will celebrate this unfolding of events. How long will it be before this business files for bankruptcy?

This is exactly the political situation in South Africa.

It is for this and many other reasons why I have maintained that a single ruler principal is not democracy .

If you have a council of presidents then you have a balanced leadership team.

Maybe what I say here is controversial buts just an idea.

Why not divide South African by their cultural groups and then let them elect their preferred Presidential Councillor. That way even the likes of the Kio San wiĺl have a leader who represents them at the highest decision level.
Obviously not more than 19 Presidential Councillors.

their responsibility would be to vote on everything from Laws to Future plans and select Ministers. So even if you have 1 or 2 bad councillors the country would still move foward.

At the same time no cultural group would elect an idiot because they would be embarrsed or when their expectations are not met they will recall them with out it causing instability to the rest of country.

Good proposal that require finrtune

My idea will allow minorities to have equal status quo. Joburg number plates have an emblem which state “Unity in Diversity”

How we get to the point where we divide our selves into cultural groups depends on Beliefs / Religion and or Race and or Ethnic bloodline.

It’s probably means divided and conquer to the narrow minded but it’s more of Gleanable Unification.

This type of democracy would be for your municipal council, regional council and provincial council.

So if the Zulus for instance dominate KZN and their happen to be a minority Chinese group they would end up have equal status quo in the decision making.

can anything coming from a cadre appointee ever be trusted. Never, been proven, just playing the EFF game, for the ANC to shallow to came up with this on their own, need a Julius for ideas on how to gain votes.

This is much ado about nothing.

The regulations and restrictions attached to shares of the SARB mean that a private shareholder gets (almost) nothing except the ability to attend the AGM, which is perhaps a nice touch for good governance, but to be honest, barely worth the candle.

It doesn’t make any difference whether it’s private or not – either way the government could undermine the economy by leveraging the Governor.

Micheal Duerr, the German bete noire of the piece, who along with his family own a massive 5%, is merely a chancer who thinks he might get a big payday as a deregistration dividend if it was nationalised and it was considered that the reserves of SA really belonged to the SARB. It’s so ridiculous its not even an interesting legal debate. Duerr has no other agenda – he’s a plonker.

I’ve even wasted 5 unnecessary minites of my life typing this.

I’m sticking to my original red flags…if one or more of these take place, South Africa is in real trouble…
– The Constitution is changed for any reason whatsoever
– The SARB is nationalized
– CR is killed

The most important ( in my opinion) is no 2. The moment the Reserve Bank is nationalized, the temptation to print money will be too much to resist and inflation will run faster than you can blink.
As Sensei has alluded to – the famine that hyper inflation will create will be unstoppable.
The SARB s independence is probably the only thing giving us economic credibility at the moment.
It MUST remain in Private shareholders hands.

You think they can’t already?

It makes little to no difference having private shareholders who don’t even attend the AGM anymore. Have you any idea what these private shareholders actually do? Or even could do if they tried. Nothing.

It really is a silly debate.

Some did try something; think of the proposed EGM – which resulted in the 2010 Amendment Act which emasculated shareholders completely and, for instance, reduced AGM’s to an utter farce / whitewash where the only purpose of the attending shareholders is to add justifiction to something that, largely, doesn’t deserve it.

Articles around the SARB’s ownership structure is confusing to the general public:

On the one hand, you have (alarming) articles like these, which implies that the governing party (ANC) can access the country’s reserves to assist the state revenue deficit, opens door to corruption, etc.

Then on other hand, one is assured that ultimate control over the SARB’ reserves remain that to the governor and his management team, and the “the ownership issue” (e.g. whether its owned by pvt shareholders or the state) has no impact on the independence of the SARB. And besides, we’re told that SA remains one of the few countries not being owned by the state. Why the worry then?

So…the billion dollar question remains: IF the ownership of the SARB has no impact on its own independence, then WHY does certain political parties push for state-ownership?? (i.e. if there’s no direct benefit for them?)

They push for state ownership because it’s a great (albeit meaningless) populist stance to take. Purely rhetoric.

Can somebody please help my education and understanding:
The $50 billion in gross reserves – how is it made up? – where is the cash (or is there even cash?)

This helps explain this ridiculous non-story.

(And at least the Rothschilds haven’t been mentioned in this thread yet)

Thanks for taking the time to reply, but I am none the wiser.
What assets are actually “owned” and can the reserve bank actually monetise the assets to be available as cash?

It’s complicated! Duerr basically reckons that private shareholders are entitled to 40% of the gold bullion owned by the SARB in 1989, which was about 110 tonnes. That would value each share at over R4000, vs. the average price of R2 that he bought at. He substantiates that in various ways, including NAV of GBP at a 30% discount and uses various precedents of other central bank nationalisations.

If you want to read more, this link provides the whole boring story, including some Noseweek articles and valuation stuff – scroll to the bottom unless you fall asleep first.

I really think there is a lot of confusion over this topic. Most central banks do not have private ownership. The reserve banks mandate (price stability) is set by the constitution (yes yes I know that is not sancrosanct anymore).

The SARB’s reserves has nothing to do with its shareholders. Its shareholders are akin more to pref shares/debentures that gets a pittiful dividend each year.

Buying out the shareholders will be a cosmetic/symbolic act – like changing the SARB’s coat of arms. It will not change anything of consequence.

I can fully understand Kganyago’s frustration. You have Malema on the left and the doomsayers on the right making a lot of ill informed noise around the topic and the media trying its best to sensationalise it without also fully understanding that the SARB’s shareholders are a historic idiosyncrasy, bit like the queen in the UK just even less relevant.

Thanks Notwarren, for your views. Accepted. OK, then not much to worry about it seems. As WTF mentioned “pure rhetoric” along with media hype 😉

To call Malema “leftie” and the EFF “commies” is an insult and a deep injustice to actual lefties and commies.

End of comments.





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