Debate to 'nationalise' Reserve Bank hots up

The shareholder group, for whom German national Michael Duerr has become an unofficial spokesman, clashed repeatedly with Marcus's predecessor, Tito Mboweni, sparking several dust-ups at the bank's annual shareholder meetings.

Duerr says the shareholders are now planning to force Marcus's hand because "we gave the Reserve Bank the opportunity to clarify shareholder rights and duties, but they have chosen not to".

"We will use the provision in the Reserve Bank Act which says shareholders representing 10% of the shares can ask the bank to call an extraordinary general meeting within 60 days." He says he "has the support of between 20% and 25% of shareholders".

Though this matter seems an insignificant tussle among the Reserve Bank's 627 private shareholders, who largely bought their shares in private, over-the-counter deals, Duerr has spoken to several members of the ruling ANC to raise the issue of "nationalising" the Reserve Bank.


Last month, ANC secretary-general Gwede Mantashe presented a report to the party's national executive committee saying nationalisation should be discussed as the "Reserve Bank is one of less than five central banks in private hands in the world".

Quite what "nationalisation" means is unclear, given that the Constitution says the Reserve Bank must remain "independent" from government so it can effectively implement monetary policy.


However, this "debate" is seen by some as an opportunistic gambit by some shareholders to push for the "liquidation" of the Bank, because the Reserve Bank Act says in that case, 60% of the bank's net assets would go to government, and 40% to its shareholders.

Duerr argues that the net assets which "belong to shareholders" exceed R12-billion - but this includes assets which many believe belong to the country, including the four million ounces of gold that sits in the bank's vaults.

If Duerr is correct, this would mean that SA Reserve Bank shares, which can at present be bought for R11 each, would be worth closer to R6000 each.

This is a controversial view. As one Reserve Bank insider told Business Times, "those are not the shareholders' assets, those are the country's assets".

But Duerr argues otherwise, rejecting the notion that he is a greedy opportunist out for personal gain. "By law, these assets belong to the shareholders, not the country. The bank is run as a proper company, and government knows it has a problem here. I've told Mboweni before that the only legal way to get rid of your shareholders is to liquidate the company, but (bank officials) are too arrogant to listen," he said.

Duerr said his motive in getting involved was to get Mboweni to improve the poor levels of governance at the Reserve Bank.

However, what could thwart his argument is that the Reserve Bank Act also says shareholders will only be paid the 40% share of net assets, or the "average market price" of the Reserve Bank shares over the previous year - whichever is lower.

As the "average market price" of the Reserve Bank shares for the last year have been about R11 each, this would torpedo any bid to claim about R6000 a share.

Duerr argues that this provision would not apply. "Here, there is not a proper market for the trading of Reserve Bank shares (which are unlisted and thus traded over the counter) so the 40% net asset provision would still stand."

But Reserve Bank legal counsel Johann de Jager said shareholders "shouldn't be treated like those in an ordinary company, because they're not". "They don't fall under the Companies Act and the Reserve Bank is an independent body which isn't 'owned' by anybody," he said.

Shareholders also cannot decide to liquidate the bank - this can only be done by Parliament - and the negligible 10c/share dividend is also controlled by legislation.

But as this debate hots up, Business Times now understands that in order to get rid of this headache, the Reserve Bank has informally lobbied minister of finance Pravin Gordhan to ask parliamentarians to change the Reserve Bank Act.

This would probably lead to investors being bought out of their shares - ending an era dating back to 1921 during which the bank had "private shareholders".

De Jager would not confirm that the Reserve Bank had asked Gordhan to press the politicians to change the act.

But he said: "If there is something which is in the press and people are speaking about (like nationalisation), it would be foolish of that institution to simply ignore the thing and hope it goes away."

However, De Jager warned that "it's not as easy as just changing an act", as disagreements over how much the shares are worth would make the process of buying out shareholders very tricky.

Source: Sunday Times