The nationalisation of the South African Reserve Bank could be a protracted and expensive legal process because some of its shareholders seek to make a profit out of the move, Governor Lesetja Kganyago said.
“A group of shareholders is agitating for the SARB’s nationalisation as they believe that they are entitled to a share of the assets of the SARB and see this as an opportunity to make enormous profits at the expense of taxpayers,” Kganyago said at its annual general meeting Friday in Pretoria, the capital. “This for what would, at best, be a cosmetic gain.”
South Africa’s central bank is one of the few in the world that’s still owned by private shareholders. In December, the ruling African National Congress ratified a proposal for the state to own the bank, which has been in investors’ hands since its founding in 1921. The shareholders vote to appoint seven of the bank’s 10 non-executive directors and have no say over policy.
More than 600 private shareholders own the bank, and they can’t hold more than 10,000 shares each, according to its website. The dividend payable to them is limited to 10 cents per share annually, or a total of ZAR 200,000 ($15,000), if the central bank makes a profit. In the six months through May Reserve Bank shares, which trade over the counter, sold for ZAR5.95 to 10 each.
The central bank’s mandate to ensure price stability is set in the Constitution and it has an inflation-target range of three to six per cent.
“The issue of the mandate of the SARB is often confused with the proposed nationalization of the SARB,” Kganyago said. “Some proponents of nationalisation believe, erroneously, that such a move would facilitate a change in our mandate.”
Some critics say the central bank’s mandate should be changed to promote employment rather than fighting inflation.
“The South African experience has taught us that boards appointed by Government are no guarantee of good governance, nor are they a guarantee that decisions will be taken in the interest of the broader economy,” Kganyago said.