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Why the SARB should be nationalised - analyst

Johannesburg – There are certain entities of the economy which are supposed to be democratically owned by all people and the Reserve Bank, which is the “apex of the financial system”, should be one of them, according to an analyst.

Speaking to Fin24 by telephone on Friday, Associate Professor at the Wits School of Economic and Business Science Chris Malikane explained why the South African Reserve Bank (SARB) should be nationalised.

This follows recent reports that 149 200 SARB shares have become available for purchase by the public.

READ: Over 149 000 Reserve Bank shares available for purchase

The shares do not serve a profit-making objective, and a dividend of 10c is payable as determined by legislation, SARB governor Lesetja Kganyago explained at a briefing on Thursday.

The shares had become available following a high court order last year, stating that shareholders, their families and associates with a holding in excess of 10 000 shares were to dispose of them. This is an effort by the SARB to ensure that individuals and companies cannot “exert undue influence” through their shareholding.

A total of 200 shares entitle a shareholder to a single vote. Shareholders have the power to appoint seven non-executive directors at the SARB. They also have a say in discussions at the annual general meeting, they can appoint auditors and their remuneration packages and they can discuss the annual and auditors report, explained Kganyago.

Kganyago also emphasised that the Reserve Bank does not “bow” to political or private pressure and functions independently in the pursuit of its mandate set out in the Constitution.

However, Malikane said that the Reserve Bank is essentially privately owned, claiming to pursue the public interest. “[The truth is] the money that is in our pockets, the money through which our labour is valued, is printed by a private institution … that is a fundamental contradiction,” he said.

He added that if the Reserve Bank had truly been pursuing public interest, it would have detected the price fixing of the currency by the big banks, and not the Competition Commission. “These things were happening under the watch of the central bank,” he said.

READ: Competition Commission prosecutes banks for collusion

Malikane said that the Constitution should be amended to declare that the SARB is state-owned. “The ownership of the assets and the ownership of the power to create liabilities on behalf of the nation must lie with a publicly-owned institution,” he explained.

“In fact, I will add that the South African Reserve Bank’s name must be changed. It must be ‘Bank of South Africa’ so that we radically depart from the past.”

Given that the shares do not pay out “quality dividends”, Malikane said the objective of prospective shareholders is to have access to state reserves, such as gold. “When you own a share in a company, you own assets in the company,” he said.

This is why existing shareholders with shares in excess of the statutory limit are not willing to dispose them. “They know if they sell shares, it means they are selling shares of the assets of the bank,” he said.

Malikane added that the call for the public to buy shares appears to be an opportunity for black South Africans to take ownership, but essentially it is still a strategy of privatisation.

The ownership of SARB shares has been criticised for not appearing “transformed” enough. At the briefing, Kganyago urged South Africans to buy shares to ensure diversity of ownership.

Kganyago explained that the private shareholding in the SARB exists because of the principles of “shared community representation and participation” in the governance of the Reserve Bank. This ensures increased independence, transparency and accountability in the interest of South Africans.

The SARB has 2 million ordinary shares, sold at a predetermined market price. They are traded over an Over-the-Counter Share Transfer Facility. 

Can you make money out of SARB shares?

Makwe Masilela, director and market strategist at BP Bernstein Stockbrokers, explained that the motivation to buy company shares is in the yield that could be generated. However, the central bank’s shares do not work like this and the motivation is not to make a profit but rather to have a sense of ownership.

“If you want to be a shareholder, then the purpose is to have control and vote in directors and not necessarily to make money,” he said. 

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