‘Reserve Bank not out for money’

2010-12-08 12:51

The South African Reserve Bank acts only in the public interest and not in the interest of making profits, Governor Gill Marcus reiterated today.

“The bank is required to conduct its activities in the public interest only, without any regard whatsoever to profit maximisation as a consideration,” she told shareholders at the bank’s ordinary general meeting in Pretoria.

“Central banks worldwide are public entities that fulfil public interest roles. In practice, the pursuit of this role is not synonymous with the realisation of profits.”

Her comments follow a few years of wrangling with a group of shareholders who want to make a profit from their stake in the bank, and had called for an increase in dividend payments.

The Bank pays an annual fixed dividend of 10 cents a share. It has about two million shares in private hands, which currently trade for around R12.50 each.

The demands had been led by German Michael Duerr, who at last year’s meeting, while barefoot and wearing lederhosen, clashed with then governor Tito Mboweni.

Duerr was not at yesterday’s meeting.

However, Marcus said the dividend policy was determined by the South African Reserve Bank Act of 1989.

“This is not a new position, but 10% dividend on nominal value has been a legal stipulation virtually since 1921, reconfirmed in the Act of 1989.

“Therefore all shareholders, irrespective of when they bought their shares, were aware of, or should have been aware of, this legally imposed limit to earnings per share,” she said.

Some shareholders also wanted the bank to annually pay them 10 percent of its profits.

“No legal authority or basis exists for any capital distribution to shareholders whatsoever.

This demand should not be entertained at all,” Marcus said.

In terms of the act, any surplus made by the bank must be handed to government.

The remaining 10% must be used to accumulate reserves.
Marcus said the contingency reserve now stood at over R9?billion.

“The sheer scale of this reserve indicates how ridiculous this demand is. The bank stands firmly opposed to entertaining any such a demand, from whatever quarter.”

In response to shareholder demands, which Marcus previously said were motivated by greed, Parliament in August passed the SA Reserve Bank Amendment Bill, designed to change the way the bank was governed, and prevent shareholders disrupting its operations for their own gain.

The bill sought to distinguish between the interests of the country and the interests of shareholders.

This was to prevent shareholder behaviour which was not in line with the public interest mandate of the bank, such as people acquiring shares above the existing limit of 10 000 by using associates, offering payments to fellow shareholders to vote them in as directors, and demanding the right to share in the bank’s profits, but without the right to share in the losses.

Present at yesterday’s meeting was shareholder Mario Pretorius, who also previously clashed with Mboweni, taking him to the Equality Court for discrimination over what he claimed were racist comments.

The court ruled in March that the utterances were nothing more than a storm in a teacup.

Pretorius thanked Marcus.

“Given our history I’d like to extend a vote of thanks for your openness and willingness to engage with us.

It was fun.

Now at least we are inside the room and it’s a pleasure to be a shareholder,” he said.

Marcus responded by saying the role of independent shareholders was very important and “vigorous engagement is what we should expect”, but that it should be “professional, courteous” relationship.?

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