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SARB’s independence entrenched in Constitution

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SARB’s independence entrenched in Constitution

26th January 2010

By: Sapa

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The South African Reserve Bank (SARB) said its independence is entrenched in the country's Constitution and "it is not owned by anyone".

In a statement released late on Monday, South Africa's Central Bank said it had "noted the media interest evidently generated by comments of African National Congress (ANC) secretary-general Gwede Mantashe and would like to clarify the current parameters within which the SARB operates".

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"The main objective of the SARB, as set out in the SARB Act and the Constitution, is to protect the value of the currency in the interest of balanced and sustainable economic growth in South Africa," the statement said.

"This is achieved through the conduct of monetary policy."

It said that since monetary policy issues and the economy affected society as a whole, central banks worldwide were regarded as public entities that fulfilled public interest roles.

"In practice, the pursuit of this role is not synonymous with the realisation of profits."

The SARB said it was required to conduct its activities in the public interest only, without regard to profit maximisation.

"The SARB is a creature of statute, with the status of an independent legal person which may not be liquidated other than by an Act of Parliament.

"Its independence is entrenched in the Constitution and it is not owned by anyone."

The SARB said that control over its mandate was exercised between its shareholders and government in a manner whereby the latter, in normal circumstances, might exercise ultimate control over the bank.

"Furthermore, the SARB Act does not grant shareholders any authority to remove directors," it said.

By virtue of the fact that the SARB was a creature of statute, it was also unable, by means of a resolution or otherwise, to amend or change the bank's constitution.

"Individual shareholders are prevented from exercising undue influence over the control of the SARB by virtue of the prescription that no shareholder may hold more than 10 000 shares in the Bank." Shareholders also received a fixed dividend at a rate of 10% per annum on the value of their shares held, provided that profits were realised.

"Voting is restricted to one vote for every 200 shares held, with a maximum of 50 votes per individual shareholder, which votes may be exercised at meetings of shareholders of the Bank."

The SARB said it was evident that the concept of shareholding was based exclusively on principles of shared community representation and participation in the oversight of the SARB, for purposes of increased independence, transparency and accountability, in the ultimate interest of the general South African public.

"SARB shareholders should therefore at all times exercise their powers in accordance with these principles and avoid any actions which could be construed as an attempt by them to abuse their powers for purposes of self-interest and own enrichment."

The SARB said it had a unitary board structure.

"The board consists of a governor, three deputy governors and three other directors, all appointed by the President (after consultation with the Minister of Finance and the board), and seven other directors, appointed by the shareholders.

"The SARB Act determines that the Bank shall be managed by the board and that the governors and deputy governors must devote the whole of their time to the business of the Bank."

 

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