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Polity
Article by: Sapa Published: 10 Aug 2010
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| NA approves Reserve Bank Bill | |
| The National Assembly on Tuesday approved a bill designed to change the way that the South African Reserve Bank (SARB) is governed and prevent shareholders disrupting its operations for their own gain. In May, SARB governor Gill Marcus urged Members of Parliament (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 SARB Amendment Bill, Finance Minister Pravin Gordhan said that 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 lot 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. "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 that 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 that 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 AGM 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. |
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