Pretoria – Reserve Bank governor Lesetja Kganyago continued to defend the mandate of the bank at its annual general meeting on Friday.
Speaking at the bank’s 97th ordinary shareholder AGM, Kganyago acknowledged that the South African Reserve Bank (SARB) has been in the spotlight for the wrong reasons.
One of these is Public Protector Busisiwe Mkhwebane’s remedial action to have the primary mandate of the bank changed.
“We have challenged this remedial action in the high court on a number of grounds, and the matter will be heard in court next week, even though the Public Protector has chosen not to oppose our submissions,” he said. The bank still wants the decision to be confirmed at the courts, he told journalists in a briefing following the AGM.
In his address, Kganyago explained that protecting the value of the currency is a core function of central banks. “I know of no central bank that does not have this mandate. These institutions are best equipped to carry out this function, and stripping them of this mandate would raise the question as to where the responsibility for price stability should lie.”
He referred to the Constitution, which states that the function of the SARB is to protect the value of the currency in the interest of balanced and sustainable growth.
Kganyago listed inflation targeting and ensuring the stability of the financial system among its other functions.
Although the SARB does not explicitly have an employment and growth mandate, this does not mean the bank has a “narrow focus” on inflation which excludes these issues.
Kganyago reiterated that monetary policy cannot be used to solve structural growth problems. But it can ensure price stability, needed for longer-term investment and expenditure decisions. “The higher and more volatile inflation is, the higher the riskiness of investment,” he said.
“Keeping interest rates artificially low may have short-term benefits, but it will result in higher inflation in the long run.
“We cannot ‘buy’ higher growth and employment through high inflation.”
Other central banks also have private shareholding
Kganyago said the private shareholding of the bank is historical. Apart from the SARB there are nine other central banks which have some private shareholding, including those of the US, Belgium, Greece and Japan.
He said despite the private shareholding, the SARB remains independent and has no profit-making motive. He added that 90% of profits is distributed to government and 10% towards reserves.
Shareholders have limited rights and cannot influence the mandate of the SARB. They can only own up to 10 000 shares and do not have any claims on the foreign exchange reserves.
Shareholders can only approve the appointment of auditors and their remuneration. They can also elect seven non-executive directors to the board. At Friday’s meeting three non-executive directors were appointed, with expertise in the areas of commerce and finance, mining and labour respectively.
The remaining non-executive directors are experts in the fields of commerce and finance and agriculture. Kganyago told journalists that they are not all necessarily economists, but experts in their respective fields.
The shareholders also approved the remuneration and the reappointment of SizweNtsabulaGobodo and PricewaterhouseCoopers as external, independent auditors.
Kganyago also said nationalisation of the bank would merely be “symbolic” as it would not impact the bank’s mandate.
“The view that the SARB is owned and run in the interest of the private sector is incorrect. Our independence and mandate are enshrined in the Constitution.
“Whether the SARB has private shareholders or whether all its shares are owned by government, its primary mandate remains.”
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