SA should nationalise SARB, parly told

Published: 06 September 2017

The South African government should buy back privately-held shares in the South African Reserve Bank (SARB) if it can afford to, an interim report tabled in Parliament recommended.

The idea - to nationalise SARB by buying back the shares - was first mooted at the African National Congress policy conference this year.

The report, which is still a work in progress, was tabled at Parliament's standing committee on finance and portfolio committee on trade and industry on Wednesday.

SARB told Parliament on August 1 that private shareholders do not own the bank and their rights are limited. They play no role in setting monetary or financial stability policy or the management of the bank, it said.

The shares are restricted to a maximum of 10 000 per subscriber out of two million issued shares. They receive a fixed return of 10c per share from profits, amounting to an overall dividend payment of R200 000 per year, it said. There are 650 private shareholders.

As much as 90% of the SARB's profits are transferred to government and the remaining 10% is allocated to SARB reserves. Private shareholders do not have claim on the foreign exchange reserves of the SARB. They also can't change the bank's affairs to deviate from the SARB Act, it explained.

"While the committee accepts SARB's explanations, we believe that if it is financially possible, the shares of SARB's private shareholders should be bought out," the interim report explains.

National Treasury agreed that this recommendation should be fully explored, Ismail Momoniat, head of tax and financial sector policy at National Treasury, told parliament on Wednesday.

"Ownership of the SARB is well recognised as a highly emotive and sensitive matter," he said. "The committee's recommendation that private shareholders be bought out if this is financially possible should be fully explored."

SARB governor Lesetja Kganyago said last week that South Africa should "not pay large sums of money for purely cosmetic changes", pointing out that this would be an expensive exercise.

'Zombie argument'

"It would not change anything useful because shareholders already have no control over the SARB's policy responsibilities," he said in a speech at Unisa's business school.

"SARB shares normally trade for about R3. The funny thing is: if you ask about buying SARB shares, you will find there are standing offers to sell from people whose price is R7 900 per share.

"Who would charge almost R8 000 for something that normally sells for R3? I suspect there are sellers out there who think we will have to nationalise the SARB in the end because it will be the only way to kill this zombie argument about private shareholders once and for all.

"As a result, they will get to make a nice profit at the expense of the South African people."
- fin24