South African Reserve Bank: Overview, Financial Insights, and Ownership Structure
Explore the role and functions of the South African Reserve Bank, South Africa's central banking authority.
What Exactly Is the South African Reserve Bank?
The South African Reserve Bank (SARB) functions as the Republic of South Africa’s central bank. Its core responsibilities include developing and executing monetary policies, safeguarding the effectiveness of the country’s financial infrastructure, and educating citizens about South Africa’s economic and monetary landscape. Additionally, the SARB manages the issuance of both coins and banknotes.
Key Highlights
- The South African Reserve Bank (SARB) acts as South Africa’s central banking institution.
- Its primary goal, alongside monetary policy management, is to keep inflation under control.
- Uniquely, the SARB is one of the world’s few privately owned central banks, though recent discussions have emerged about potential nationalization.
A Closer Look at the South African Reserve Bank
Established under the Currency and Banking Act of 1920, SARB began operations in 1921. Its creation was driven by post-World War I economic uncertainties, highlighting the need for centralized monetary oversight and government regulation. Notably, it was among the first central banks founded outside the developed Western economies like the U.S., U.K., and Europe. Prior to SARB’s formation, commercial banks managed South Africa’s currency.
The SARB is overseen by a 14-member board, including the governor, three deputy governors, three directors appointed by the South African president, and seven representatives from key sectors such as agriculture, commerce, and finance.
Since its establishment, SARB has been led by 10 governors. William Henry Clegg was the inaugural governor, serving for 11 years. The current governor, Lesetja Kganyago, has held the position since 2014.
The bank’s headquarters are located in Pretoria, South Africa, employing around 2,000 professionals.
Core Objectives of the South African Reserve Bank
SARB’s primary mission is to maintain price stability for the rand to support balanced and sustainable economic growth. Specifically, it targets an inflation rate between 3% and 6% annually based on the South African consumer price index.
Additional responsibilities include restoring financial stability during systemic crises, enforcing prudent regulation and supervision of financial institutions and markets, and continuously monitoring the overall financial system.
R27.4 billion
Total reserves held by the South African Reserve Bank
Financial Overview of the South African Reserve Bank
According to the latest available annual report for 2018/2019, SARB’s net investment income rose by R5.8 billion, while operational expenses increased by R1.8 billion. This resulted in an after-tax profit of R4.6 billion.
The bank’s total assets were reported at R872.8 billion, marking a growth of R131.0 billion.
Ownership Structure of the South African Reserve Bank
Distinct from most central banks worldwide, the SARB remains privately owned. As of February 2020, there are approximately two million shares held by over 783 shareholders, predominantly South Africans, with just over 8% owned by foreign investors primarily from Germany. Shareholders do not influence monetary policy decisions or the appointment of the governor and deputy governors.
In 2018, a left-wing South African parliamentarian introduced legislation aiming to nationalize the SARB. Although the bill initially lapsed, it was reintroduced in November 2019. President Cyril Ramaphosa has expressed support for government ownership but currently opposes nationalization due to potential economic and taxpayer burdens.
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