The ins and outs of the Reserve Bank

What do two former governors, a world-renowned civil engineer, a professor, a European economist, and the Nelson Mandela Children’s Fund have in common? They are all shareholders in the South African Reserve Bank. 

The bank has issued 2-million shares owned by more than 800 local and international shareholders from as far afield as the US, the UK and other European countries. 

Individual shareholders include former Reserve Bank governor and finance minister Tito Mboweni who holds 10,000 shares; another former governor Chris Stals with 200 shares; BASF Construction Chemicals mining manager Ian Northcroft ( 300 shares); Brevan Howard economist Andreas Billmeier (100); visiting professor at the Wits Business School, Jannie Rossouw (10,000); and prominent economist and commentator Dawie Roodt (200). 

Institutional shareholders include Absa Bank and FirstRand Bank, which both have 10,000 shares; Agri SA (about 1,000); the Anton Rupert Trust (200);  the ArcelorMittal South Africa Pension Fund (1,000); Bidvest Bank (500); and the Master of the high court in Cape Town (1,000). The South African Police Widows & Orphans Fund has 10,520 shares, the Bothaville District Farmers Union has 1,000, and the Nelson Mandela Children’s Fund has just 100 shares.

Although the shareholders cannot determine monetary policy — their rights are limited to considering the Bank’s annual financial statements and electing nonexecutive directors — the private ownership of the central bank has sometimes stirred polemics.

In 2017, the ANC passed a resolution at its Nasrec conference directing the government to buy back the 2-million shares and nationalise the bank. But the party that now governs under a coalition with several other parties, has since walked back that resolution after calculating that a share buyback would cost the state billions of rand — money that is simply not there.

This week, governor Lesetja Kganyago addressed the shareholders at the Bank’s 104th annual general meeting, where they elected three nonexecutive directors to the board. 

The Bank is one of only eight central banks globally that have private shareholders. The shares were available on the JSE until the Bank was delisted in 2002 in exchange for an over-the-counter share transfer facility, which was introduced in 2005.

How it works

The governor and deputy governors are executive members of the 15-member board, while seven board members are appointed as nonexecutive directors to support governance. These are elected by the shareholders after screening by a panel constituted in terms of section 4 of the South African Reserve Bank Act.

“The nonexecutive directors have no rights or involvement in determining monetary policy, financial stability policy or regulation and supervision. The governor serves as the CEO of the Bank and the chair of the board in terms of the act.”

Only those holding 200 or more shares get to elect nonexecutive directors, and a shareholder cannot hold more than 10,500 shares.

The act allows the Bank to declare dividends at the rate of 10% per annum on the paid-up share capital. An interim dividend of 5c/share was approved by the board in July last year and paid to shareholders in October of that year. A final dividend of 5c/share was approved by the board in February and paid to shareholders in May.

The nonexecutive directors have no rights or involvement in determining monetary policy, financial stability policy or regulation and supervision. The governor serves as the CEO of the Bank and the chair of the board in terms of the act

Who’s who?

According to the annual report for 2023-2024, the governor and three deputy governors are appointed by the president in consultation with the minister of finance. The president also appoints four other nonexecutive directors.

At the AGM, Aspen Pharma Group’s nonexecutive director Yvonne Muthien was re-elected as a nonexecutive director with expertise in commerce and finance. Cheadle Thompson & Haysom Attorneys director Shamima Gaibie was re-elected nonexecutive director with expertise in labour matters. Anglo Platinum chair Norman Mbazima was re-elected nonexecutive director with expertise in mining.

The N-word

EFF leader Julius Malema has tabled a private member bill, which is before the standing committee on finance, seeking to make the state the sole shareholder of the Bank and empower the finance minister to exercise the rights attached to the bank’s shares. 

The bill proposes that instead of directors of the board being elected at an ordinary general meeting of shareholders, they should be appointed by the finance minister. 

Roodt said he became a shareholder decades ago as a young economist to get access to the monetary policy committee, the Bank’s research department, and its staff. However, he joked that he stuck around as a shareholder for the “great biltong” and wine served at the AGMs.

“I became a shareholder when it was listed. The reason I did that was exactly for these AGMs of the Reserve Bank. I was invited and there I had an opportunity to elect members of the board and engage with the central bank.”

He acknowledged that some shareholders bought shares under the mistaken view that if it were to somehow be nationalised or liquidated, they would have a direct stake in the billions the Bank keeps as reserves. 

“Some shareholders acquired their shares with their eye on the reserves as they argue that the reserves belong to shareholders and that should the Reserve Bank ever get liquidated or nationalised, they would be entitled to these reserves. That is not the case.

“These reserves actually belong to the people of South Africa, or more specifically to the National Treasury as a custodian of the state and the people of South Africa.”

Redge Nkosi, executive director at Firstsource Money, said the people of South Africa should be the main shareholders of the Bank.

“In my view, if the Reserve Bank is to be a bank that first and foremost is there to serve national interests, then quite frankly the right person to be the shareholder of that bank is the nation itself. The nation must have a say in every single aspect of the central bank if it is to serve the interests of the people.”

He said the Bank of Japan’s first mandate was to produce money for the economy, and this changed to a mandate to stabilise the money that the central bank itself created as the need arose.

Miyelani Mkhabela, founding director and CEO at Antswisa Management Group, said since the Bank has domestic as well as global shareholders from the UK, US, Germany, France and Norway, its AGMs tend to become extensive networking platforms.

“Based on good governance and accountability principles, the Bank’s shareholders are limited to practise as a monetary economists or comment about the operations of the central bank and monetary policy forecasts as their views are not independent as economists.”

Shareholders are entitled to a maximum dividend of 10c/share annually from accumulated reserves. Mkhabela said the Bank doesn’t pay huge financial dividends annually but the social capital network of the AGMs is extremely valuable.