The EFF has introduced the South African Reserve Bank Amendment Bill which seeks effectively to nationalise the SA Reserve Bank (SARB) by removing private ownership of shares in SARB and vesting these with the state.
The EFF bill has the explicit aim of expropriating the shares of 802 private shareholders, who include finance minister Tito Mboweni (10,000 shares), DA shadow finance minister Hill Lewis, the Anton Rupert Trust, Discovery, Absa, Nedcor, FirstRand Bank and Nedcor.
These shares would be expropriated without compensation and vested in the state on behalf of 57 million South Africans. “For true sovereignty and autonomy, the SA Reserve Bank must be transferred to the state,” says the EFF in a Parliamentary presentation. “The next debate will be on its mandate.”
While it would cost billions of rands to nationalise the Reserve Bank, the EFF sees a more expedient solution as the expropriation of private shareholders. The share capital of the Reserve Bank is set at R20 million, and the dividend per share at R1,000. Hence, the party says the financial loss to shareholders is limited.
Parliament’s Standing Committee on Finance and Select Committee was given a briefing on the proposed bill on 25 August 2020, when the DA questioned its constitutionality, particularly Section 25 which prohibits arbitrary deprivation of property. At the presentation to Parliament, the EFF’s Floyd Shivambu said the majority of the Reserve Bank’s existing shareholders were white and non-South African citizens, and that the aim of the proposed amendments was to protect the Bank from the abuse suffered by many state-owned companies.
Parliament’s legal services unit has also raised concerns over the constitutionality of the proposed amendments. The law as it stands – underpinned by Constitutional Court findings – require expropriation to be accompanied by compensation. Adv Noluthando Mpikashe, the Parliamentary Legal Advisor, told the Standing Committee that the law is vague as to what is considered just and equitable compensation, and that the EFF bill may not pass constitutional muster.
The EFF bill seeks to give the minister of finance powers to regulate the appointment of directors to the SARB, and to further regulate the tenure of these directors and how they are to be appointed.
The bill further proposes allowing the minister of finance to appoint the SARB auditors.
The EFF bill proposes amending several sections of the South African Reserve Bank Act of 1989:
Section 4 of the SARB Act, particularly that section which allows shareholders to elect directors. The EFF wants the minister of finance to perform this function.
Section 4A, which requires the SARB to submit annual financial statements to shareholders (as well as the minister of finance and Parliament). The EFF wants this section amended to exclude private shareholders.
Sections 5, 6 and 9, which deal with the appointment of directors, their tenure and conditions of appointment. The EFF wants the state to step into the shoes of the private shareholders when it comes to directorial issues. Section 9 deals with the validity of board decisions. The current SARB Act deems board decisions invalid only when there are insufficient board members or when a disqualified person sits on the board. The current Act requires shareholders to elect seven directors from candidates confirmed by a panel, though the Act also allows any member of the public to nominate directors for selection. It is uncertain whether the EFF wants this function to be performed by the state, or whether SA citizens should be allowed to continue nominating their preferred directors.
The EFF wants Section 10, which deals with the powers of the SARB, to be amended to remove its power to “form shares” for issue to private owners, as these will henceforth be owned by the state.
Section 13 of the SARB outlines certain prohibited businesses, such as the purchase of its own shares, or the purchase of shares in a bank (without the minister of finance’s approval). The bill seeks to remove these prohibitions, which would allow the Reserve Bank to purchase it own shares, buy shares in a bank, would remove limitations on the SARB’s ability to purchase government bonds from Treasury.
Section 21 of the Act sets the share capital of the Reserve Bank at two million ordinary shares of R1 each. The Bank is allowed to increase its capital with board approval. The EFF proposal would make the state the owner of these shares.
Section 30 authorises the appointment of two firms of public accountants by shareholders to act as auditors of the Bank. The bill proposes vesting this authority with the state.
At a recent presentation, the EFF outlined the motivation behind the proposed amendments: “The South African Reserve Bank as one of the apex of the financial system in the country should be democratically owned by the people as a whole as a necessary and important building block towards complete overhaul of the currently white-owned financial sectors.
“A state owned SARB must pursue decisive transformation of the financial sector in a manner that will change its current dominance of descendants of colonial settlers.”
What’s your opinion on the EFF’s South African Reserve Bank Amendment Bill? Is it time to place ownership of the bank in state hands? Or would this open the door to the possibility of state meddling in the economic life of the country?