Has monetary policy independence been undermined?

Address by Gill Marcus, Governor of the South African Reserve Bank to the 1926 Rand Club, Johannesburg - 30 November 2010 

We are nearing the end of a difficult year, a year that began with so much promise but is now ending on a note of high uncertainty. On the global front, the expectations of a normalisation in the advanced economies were proved to be wrong, and indications are that low growth and accommodative monetary policies are likely to be sustained for some time. This has contributed to the strength of the rand exchange rate as capital continues to flow out of the advanced economies in search of higher yields. Domestically, growth has also disappointed. However the strong rand has contributed to the more benign inflation environment which, along with a persistent negative output gap, has contributed to lower interest rates.

Bank warned against shareholder change

It is not only disgruntled private shareholders of the Reserve Bank who are opposing proposed legislative amendments to the way the institution is governed.

An independent think-tank and a university professor have joined the chorus of opposition, on grounds that the proposals would undermine corporate governance and democratisation.

Until now opposition to the South African Reserve Bank Amendment Bill — and its provisions to limit shareholder power — has seemed to emerge from a fringe of noisy shareholders who every year cause a rumpus at the bank’s annual general meetings and are demanding a greater share of its profits as a dividend.

More on the SARB shareholder muddle

Although it is said that shareholders in the SA Reserve Bank have no say in the operations of the central bank or monetary policy some shareholders use their holdings to disrupt Reserve Bank general meetings, using time-wasting tactics to press their demands, which the central bank and government say is, ultimately, to ensure bigger payouts.

One such shareholder, Mario Pretorius, pictured right, found himself in the limelight last week when minister of finance Pravin Gordhan announced that he would be piloting a bill through parliament designed to limit the influence of private shareholders over the central bank.

"Certain shareholders might be circumventing the law and accumulating the shares to influence decision-making at the annual general meetings of the board, and to improperly interfere in the operations of the bank itself," Gordhan said.