[Preamble: now that the ANC has reiterated a call to nationalise the SARB, I wanted to re-share an older post on the ownership of the Reserve Bank. And the ownership of reserve banks in general]

Like any good university student, I was introduced to “The Zeitgeist” movies by a pot-smoking friend who’d seed it with his crew of anarchist buddies. And I guess that university is the time to delve deep into those conspiracy theories about cabals of bankers, the Christ-Horus and the evil machinations of the US government.

And hey, who knows, maybe they’re right.

But I know how difficult it is to manage a team of 80 or so people – and if you want to indulge in these types of conspiracy theories, then you’d have to believe that someone out there is somehow able to manage millions of us (if not billions) without us being aware of it. Except for these suspicious pot-smoking anarchists. Who are somehow able to put their “findings” on Youtube without retribution from the cabals.

Seems unlikely.

But one thing that people keep coming back to is that the Federal Reserve is “privately-owned”.

<insert gasp of horror here>

And so is the South African Reserve Bank.

In fact, so were almost all central banks at some point in time.

The ownership of the South African Reserve Bank

Here’s an extract from the SARB website:

When the Bank was established in 1921, the majority of central banks worldwide had private shareholders (or ‘stockholders’ as they were occasionally called).  A similar structure was introduced in South Africa.

Internationally, however, this approach has changed since the 1930s.  Nationalisation of central banks during the period of economic hardship in the midst of the Great Depression commenced with the nationalisation of the central banks of New Zealand in 1935 and Denmark in 1936.  After World War II in the wake of state ownership of key industries in numerous countries nationalisation of central banks continued.

The structure of shareholding in the Bank has however not been amended since its inception and it is a juristic person in terms of its own Act.  The South African Reserve Bank and seven other central banks (Belgium, Greece, Italy, Japan, Switzerland, Turkey and US) have shareholders other than the governments of their respective countries.


Today the Bank has more than 660 shareholders and its shares are traded on an Over- the-Counter Share Transfer Facility market (OTCSTF market) co-ordinated within the Reserve Bank. Except for the provision of the SA Reserve Bank Act that no shareholder shall hold, or hold in aggregate with his, her or its associates, more than 10 000 shares of the total number of 2 000 000 issued shares, there is no limitation on shareholding.

After allowing for certain provisions, payment of company tax on profits, transfers to reserves and dividend payments of not more than 10 cents per share to shareholders, the surplus of the Bank’s earnings is paid to the Government. The Bank’s operations are therefore not driven by a profit motive, but by serving the best interests of all the people in South Africa.

The Bank was delisted from the JSE Securities Exchange South Africa on 2 May 2002 and a live trading facility for its shares introduced on 1 October 2005.  The live trading facility operates in terms of the OTCSTF rules.  As such, it is not an on screen trading facility, but rather operates by means of postal, facsimile, hand delivery or e-mail communication only.

Are those Reserve Bank shares really shares though?

To be clear, shares in the SARB are not great investments. And I’m definitely not convinced that we should be calling them shares. Holding a share normally gives you two things:

  1. A right to the company’s profits; and
  2. A say in the company’s affairs (usually, proportional to your ownership percentage).

In the case of the SARB:

  1. Shareholders have no rights to the SARB’s profits – they’re only allowed a 10 cent annual dividend; and
  2. Shareholders have no say at all in the SARB’s operations – those are governed by acts of parliament. And when it comes to SARB management, those are all political appointments.

So if we’re completely honest, SARB “shareholders” are not true shareholders at all. They own a right to a 10 cent stream of income, which basically makes them owners of a small annuity. An annuity which, at its maximum limit, will give the owner R100 per year (don’t forget that your maximum allowed shareholding is 10,000 shares).

And across the SARB’s 2 million shares, we’re talking about an annual payout of R200,000. Which is a rounding error.

In fact, even the Reserve Bank doesn’t think that we’re talking about real owners here. In their financials, their entire list of shareholders is collectively grouped under “non-controlling interest”.

If you’re interested, the full list of shareholders as at 31 January 2016 can be found here. I’m almost tempted to throw R50 into the ring, just so that I can say that I own some shares in the SARB.

What it really means

But it really means nothing. Just some antiquated vestiges of a by-gone age, where people thought that the “independence” of the central bank meant that it could not be owned by the State in name (even if it was State-owned in practice).

The main point is: ownership is not in a stock certificate – ownership is being in control. And if you’re not in control, then you’re not the real owner.

So the SARB is already nationalised.

And why fix what isn’t broken?

Rolling Alpha posts opinions on finance, economics, and sometimes things that are only loosely related. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha. Also, check out the RA podcast on iTunes: The Story of Money.