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S.Africa cbank: shareholders should not abuse power

Published 01/26/2010, 02:09 AM
Updated 01/26/2010, 02:12 AM

* Bank says mandate is to protect value of currency

* Says independence enshrined in constitution

By Stella Mapenzauswa

JOHANNESBURG, Jan 26 (Reuters) - South Africa's central bank has reiterated its mandate of protecting the value of the local currency for sustainable economic growth and warned shareholders against abusing their power for personal interests.

In what it said was a response to the media interest generated by reports that the ruling ANC has called for the nationalisation of the institution, the bank also reaffirmed its independence as entrenched in the constitution.

Local newspapers reported on Sunday that top officials in the ANC are pushing for the state to take over ownership of the bank, one of the few central banks in the world to still owned by private shareholders.

The papers said ANC Secretary-General Gwede Mantashe had presented a document to the party's top decision-making committee questioning why the private sector still had ownership. [ID:nLDE60N03B]

"The South African Reserve Bank (SARB) has noted the media interest evidently generated by comments of ANC Secretary-General Gwede Mantashe," the bank said in a statement clarifying the parameters within which it operates.

"The SARB is required to conduct its activities in the public interest only, without regard to profit maximisation," it said, adding control was exercised between shareholders and government "in a manner whereby the latter, in normal circumstances, may exercise ultimate control over the Bank".

"Shareholders should ... at all times exercise their powers in accordance with these principles and avoid any actions which could be construed as an attempt by them to abuse their powers for purposes of self-interest and own enrichment," the statement added.

Shareholders in the Reserve Bank are entitled to appoint half of the board of directors but have no say in the day-to-day operations, or policies, of the bank. The governor and deputies are appointed by the president and are responsible for running the bank.

Changing its ownership structure would not have a major impact on the bank's operations but a move to more state control may raise fears of political interference in policy decisions.

The ANC's labour union and communist allies have called for changes to the mandate of the bank, which they see as too focused on controlling inflation to the detriment of poor South Africans. They want policymakers to also take into account jobs and growth when making interest rate decisions.

Unions say the central bank has not cut interest rates aggressively enough to help an economy that existed its first recession in nearly two decades late last year.

Governor Gill Marcus is due to announce the bank's latest rate decision on Thursday at the end of the bank's first policy meeting this year, with most economists expecting rates to stay on hold. (Editing by Tomasz Janowski)

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