South African Reserve Bank (SARB) Governor Gill Marcus on Tuesday accused a “small minority” of shareholders — from who the central bank is currently facing a challenge — of not caring about the national interests of the country and being profit-driven.
In a letter to shareholders of the SARB, Marcus said she was fully aware that the vast majority of shareholders who participate in the governance of the bank do so “in full recognition and support of its status as a national asset with the task of serving South Africa’s people and its economy”.
But despite this commitment, and the enormous goodwill towards and trust in the bank she has heard expressed from across all communities in the country, Marcus said the institution currently “faces a challenge, ostensibly lacking in principle and evidently driven by the self-interested profit motive, of a very small minority of shareholders”.
“This small minority does not appear to care about the national interests of the Republic of South Africa,” she asserted.
Marcus pointed out that freely traded shares had always been an invitation to individuals and institutions to buy into and to participate on an ongoing basis in the national consensus on the bank’s role on behalf of the country.
“Your responsible exercise of your rights and duties as a shareholder remains a significant contribution to the diversity necessary for the achievement of the very broad consensus on which we operate,” she wrote to shareholders.
Profit-making should never be a motive for holding shares in the central bank, she added.
“The bank is neither designed nor expected to maximise profits. The fixed dividend paid and the limited voting rights available to private shareholders underline the fact that the bank — like its counterparts in other countries — is a public entity that acts in the public interest.
“Responsible private shareholders help entrench and enhance the bank’s independence. They support its public-interest mission. Clearly, a private shareholding in the SARB is first and foremost a service to the nation and to the economy,” Marcus stated.
She reiterated that the independence of the SARB is entrenched in the Constitution and that the private shareholding is designed to enhance this independence.
Public interest
She also pointed out once again that the SARB is a legal person in its own right and that central banks worldwide are regarded as public entities that fulfil public interest roles.
The SARB is required to conduct its activities in the public interest and is not required or designed to maximise profits.
The role of private shareholders in the SARB is not to determine the bank’s purpose or conduct, and they have a limited and indirect role in governance of the bank, she explained.
This role is exercised primarily through the directors elected by shareholders (who comprise seven of the 14 board members), and private shareholders have no direct role in the operations of the bank and are not authorised to remove the CEO or governor of the bank, who is elected by the president. They also cannot alter the structure, purpose or conduct of the institution.
“The reason a single shareholder may not hold more than 10 000 shares in the bank is primarily to prevent individuals and companies or other entities from exercising undue influence over the control of the SARB. This is underlined by the fact that voting is restricted to one vote for every 200 shares held, with a maximum if 50 votes per shareholder, the SARB governor added.
Marcus concluded the letter by saying: “You will, I believe, agree with me that those among the bank’s shareholders who do not subscribe to the legal framework and national consensus described above cannot claim to be acting in the interests either of the bank, the people of South Africa, or the nation’s economy.” — I-Net Bridge