Chairperson, Cabinet colleagues and hon members, on 21 April 2010 Cabinet announced the need to amend the South African Reserve Bank Act of 1989 to ensure that it meets its constitutional mandate. These amendments are designed to enhance the governance of the Reserve Bank and to uphold its public interest role.
The "public interest" principle forms the cornerstone of a central bank and particularly that of the South African Reserve Bank. The central bank derives its mandate from the Constitution, read together with the South African Reserve Bank Act of 1989. The Constitution of this country mandates the Reserve Bank to protect the value of the Rand in the interest of balanced and sustainable growth. It must do so without fear, favour or interference.
The Reserve Bank is also responsible for the supervision of commercial banks. As the US financial crisis has reminded us, the supervision of banks is a crucial task. South Africans did not experience the financial crisis partly because of the quality of work of the supervision department of the Reserve Bank.
The Reserve Bank also manages the country's foreign exchange reserves and flows of money between South Africa and the rest of the world. It is also responsible for the national payment system, which enables 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 for us as South Africans. The Reserve Bank cannot be distracted from its mission by self- interested shareholders.
As members of this House will be aware, there has been a lot of debate and speculation about the role of private shareholders in the Reserve Bank. Our approach in this matter is driven by practical considerations and by what is in the best interest of South Africa. The nature of ownership of the Reserve Bank does not matter that much, as long as the bank fulfils its public-interest role. This is borne out in reality by the fact that you have other central banks in the world, including those in Japan, the USA and Switzerland, that have private shareholders.
The Amendment Bill tabled in this House today seeks 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.
From its inception, it has always been the intention that the rights of public shareholders will be secondary to the public-interest role of the Reserve Bank. Even the current South African Reserve Bank Act of 1989 provides for and limits ownership of shares by an individual to no more than 10 000. It also restricts the dividend payable to shareholders to a fixed amount. In addition, it restricts the ability of shareholders - irrespective of nationality - who are not ordinarily resident in South Africa, to vote. Finally, it prohibits shareholding by nominees. These restrictions seek to ensure that there is no excessive and negative influence on the operations and management of the Reserve Bank as a public- interest entity.
It has come to light that some shareholders have been trying to get around these restrictions. Their ultimate aim is to derive private gain. These shareholders have, for example, acquired shares above the existing limit of 10 000 by using associates; they have offered payments to fellow shareholders to vote them in as directors; and they have also demanded the right to share in the profits of the bank but without the right to share in the losses of the bank.
These are not the actions of shareholders who believe in the public- interest role of the Reserve Bank or have the interest of South Africa at heart. However, private shareholders, with limited rights, still have an important role to play in a public-interest entity like the Reserve Bank. In particular, they support and enhance the independence of the Reserve Bank and its governance.
The Amendment Bill tabled in the House today seeks to uphold the nature and importance of the Reserve Bank as a public-interest entity, created by Government for the benefit of all South Africans. The Bill seeks to achieve this by doing the following: Firstly, it stops shareholders from circumventing the current Act's limitation of a maximum of 10 000 shares per shareholder.
[Interjection.]