JOHANNESBURG: South Africa’s Lesetja Kganyago has a fight on his hands to protect the central bank’s $50 billion of reserves.
More than eight months after the ruling African National Congress decided that the South African Reserve Bank should be state-owned, like most other central banks, the governor said his main concern remains to protect the regulator’s independence and mandate.
But also at risk may be billions of dollars in reserves and a legal brawl that could last for years.
While the 97 year-old Reserve Bank’s shares are only worth about 20 million rand ($1.4 million) based on the current share price, some shareholders have argued the bank’s assets belong to them and they should be compensated for that when the government nationalizes the institution, according to Kganyago. Eight percent of its 770 owners are foreigners, so steps to nationalize could be challenged using bilateral investment treaties or end in international arbitration.
“This is not a fight I want to be busy with,” Kganyago said in an interview in his 32nd floor office in the capital, Pretoria. “There is sufficient emerging-market turmoil that keeps me busy. I should not be wasting my time on this thing.”
‘Paid to Go’
The rand slumped to its weakest level against the dollar in two years last month as upheaval in Turkey spilled over into other emerging markets. The currency was 0.2 percent lower at 14.7115 per dollar as of 7:16 a.m. in Johannesburg Monday.
Some of the investors do feel they are entitled to a share of the reserves, but they are wrong, said Jannie Rossouw, the head of economics and business sciences at the University of Witwatersrand. He is a former secretary at the Reserve Bank and owns its shares.
South Africa had $50.5 billion in gross reserves at the end of July and holds about 170 billion rand of deposits on behalf of the state, according to central bank data.
Some shareholders “want to be paid to go away,” Kganyago said. “‘Show me the money, show me the money!’ is what they are looking for.”
South Africa’s central bank is one of a handful, including Switzerland and Japan, still owned by private individuals. However, shareholders are limited to 10,000 shares each and have no say over monetary policy. They get to vote for seven of the central bank’s 10 non-executive directors.
