Pretoria
- The National Assembly on Tuesday approved a bill designed to change the way
the SA Reserve Bank (Sarb) is governed and prevent shareholders disrupting its
operations for their own gain.
In May, Sarb governor Gill Marcus
urged MPs to fast-track the legislation ahead of the appointment of three new
directors to the bank's board at its next annual general meeting in September.
Introducing debate on the SA Reserve Bank Amendment Bill, Finance Minister Pravin Gordhan said the
amendments were designed to enhance the bank's governance and to uphold its
public interest role.
The constitution mandated the bank to protect the value of the rand in the interest
of balanced and sustainable growth, without fear, favour or interference.
The Sarb was also responsible for supervising banks - a crucial task - and
managed the country's foreign exchange reserves and flows of money between South Africa
and the rest of the world.
It was also responsible for the national payment system, which enabled the
transfer of money from one party to another.
"I am sure that you will agree with me that an institution to which we
have delegated such important responsibilities must be stable at all times.
"There's too much at stake. The Reserve Bank cannot be distracted from its
mission by self-interested shareholders," Gordhan said.
There had been a great deal of debate and speculation about the role of
private shareholders in the Sarb.
"Our approach in this matter is driven by practical considerations and by
what is in the best interest of South
Africa," he said.
The Sarb's nature of ownership did not matter that much, as long as the bank
fulfilled its public interest role.
This was borne out in reality by the fact that other central banks, including
in Japan, the US, and Switzerland, had private
shareholders.
The bill sought to strengthen the balance between the interest of the country
and the interest of shareholders.
Urgent attention
"This balance is important, since we all need a Reserve Bank that focuses
on its constitutional mandate without undue interference by self-interested
shareholders.
"It is for this reason that existing private shareholders should not treat
the Reserve Bank as a profit-making institution. Private shareholders must have
rights, but limited rights," Gordhan said.
It had come to light that some shareholders had been trying to get around these
restrictions to derive private gain.
They had, among other things, acquired shares above the existing limit of 10
000 by using associates, offered payments to fellow shareholders to vote them
in as directors, and demanded the right to share in the Sarb's profits, but
without the right to share in the losses.
Gordhan said these were not the actions of shareholders who believed in the
Sarb's public interest role or had South Africa's interest at heart.
But private shareholders, with limited rights, still had an important role to
play in a public interest entity like the Sarb.
In particular, they supported and enhanced the bank's independence and its
governance, he said.
The bill sought, among other things, to stop shareholders from circumventing
the current act's limitation of a maximum of 10 000 shares per shareholder.
It allowed for the nomination of directors by a broader base of South Africans
and to broaden representation on the board, provided for establishing a panel
for electing directors, and defined clear criteria for the disqualification of persons
from serving on the board.
It further provided for the confirmation of board nominees against "fit
and proper" and fiduciary criteria, clarified the powers and functions of
the board, and provided for the possibility of the governor and deputy governors
to be re-appointed to serve a term of less than five years.
On the bill's urgency, Gordhan said the bank's board currently had three
vacancies.
"It is the desire of the governor and government that these vacant
positions be filled with fit and proper persons with the assistance of the
panel."
This would also mean that the best candidates should be available for election
at the annual general meeting later this year.
Secondly, both cabinet and the governor felt that the potential destabilisation
of the Sarb by a few shareholders warranted urgent attention, he said.
The bill now goes to the National Council of Provinces for concurrence.
- Sapa
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