The South African Reserve Bank (SARB) plays an integral role in the economic framework of South Africa. Its foundations, mandate, unique shareholder structure, and policy decisions significantly influence the trajectory of the South African Rand (ZAR).
THE BIRTH OF THE SOUTH AFRICAN RESERVE BANK (SARB)
Established on June 30, 1921, the SARB is the oldest central bank in Africa. The idea for its creation was born out of the need for an independent monetary authority that could stabilize the nation's currency, which was experiencing fluctuations due to the economic aftermath of World War I.
In its early years, the SARB was privately owned, but it was nationalized in 1945, bringing it under the control of the South African government. Since its inception, the SARB has played a crucial role in the country's economic policy. It has witnessed and weathered the Great Depression, World War II, the apartheid era, and the transition to a democratic government.
SHAREHOLDERS OF THE SOUTH AFRICAN RESERVE BANK (SARB)
Unlike most central banks, the SARB is a publicly owned entity. It has over 650 shareholders who hold a certain number of shares. However, to prevent undue influence, the SARB's shareholders have limited rights which are limited by law. They cannot exercise power over the bank's policy decisions, which remain the exclusive domain of the Governor and the Monetary Policy Committee.
No shareholder or group of associated shareholders may own more than 10,000 shares individually. Furthermore, non-residents and their associates may not hold more than 40% of the total issued shares. The shareholders have limited rights, which primarily include the right to elect a minority of the directors and receive a limited dividend.
THE MANDATE OF THE SOUTH AFRICAN RESERVE BANK (SARB)
The SARB's mandate is outlined in the Constitution of the Republic of South Africa. The primary objective of the SARB, as stipulated in Section 224(1), is to "protect the value of the currency in the interest of balanced and sustainable economic growth." The bank achieves this through its monetary policy, which aims to maintain price stability. Moreover, the SARB has the responsibility to oversee the South African financial system's stability. It's also tasked with issuing banknotes and coins, acting as the banker for the government, providing banking services for commercial banks, and managing the country's gold and foreign exchange reserves.