South African Reserve Bank (SARB)
- The South African Reserve Bank (SARB) is the central bank of South Africa. The SARB regulates the amount of money available (money supply) in South Africa. It has the right to create money and to set the repo rate, which effectively allows it to control the availability of credit in South Africa.
- South African Reserve Bank
The SARB was established in 1921 after Parliament passed the “Currency and Bank Act of 10 August 1920″. It was modeled after the Bank of England and was only the fourth central to be established outside the United Kingdom and Europe.
What does the SARB do?
The SARB regulates the money supply in South Africa, controls credit, supervises and regulates commercial banks, acts as funding agent for the government, collects, processes, interprets and publishes economic statistics and other information and performs financial surveillance.
The SARB achieves this by:
- Creating, issuing and destroying money.
- Increasing and lowering the repo rate.
- Increasing and decreasing the Reserve Bank’s foreign exchange reserves.
- Increasing and decreasing the Reserve Bank’s gold reserves.
- Issuing banking licenses to commercial banks and monitoring their activities.
- Monitoring foreign exchange controls and advising the Minister of Finance.
This definition is part of the Dictionary of Financial Terms. If you want to receive a notice every time a new definition is published, you can subscribe to Liberta.
May 21st, 2009 at 12:20 pm
Hi Francois
Who are the shareholders of the SARB? Are they local or foreign? Do they have interests in other commercial or central banks, local or foreign? Could it be the SARB is controlled be the same people who control the FED or the BOE?
May 26th, 2009 at 07:53 pm
@Chris
I know that the SARB is privately owned, but I don’t know exactly who the shareholders are (I also haven’t really made much of an effort to find out – I’ll make a plan).
Looking at the way the SARB has behaved over the last few years, however, it seems to me that they really do have the best interests of South Africans at heart.
I don’t think their monetary policy was out of line or aimed at crippling the economy for their benefit. If I had to critisize, I would say they dropped rates too low during the 2004 to 2006 boom period, which led to dangerously high debt levels.
Other than that, I think they’ve done pretty well, i.e. what is best for most South Africans – which is to inflation in check, but allow for as much as possible economic growth.
May 27th, 2009 at 08:14 pm
Hi Francois. Not sure if i agree with you. If the SARB operate a fractionally reserved fiat currency and charge the government interest for the money based on the governments ability to collect taxes for something the government can do itself, then they are no different from the likes of The Fed and BOE. They are in business to steal people’s assets and savings. Another question to ask is why does a central bank have to borrow from the IMF/World Bank who themselves just print money with no reserves when the central bank can just print it’s own. As much as I’d like to think they are acting in SA’s best interest.
You might enjoy these
http://www.youtube.com/watch?v=czcUmnsprQI&feature=channel_page
http://www.youtube.com/watch?v=iYZM58dulPE&feature=channel
God Bless
May 27th, 2009 at 09:59 pm
@Chris
I’ll be sure to watch those videos, they look really good.
There are many things about our banking system that I don’t like.
In particular, I think fractional reserve lending is a really crap idea and the single biggest cause of financial instability. If I could have it done away with today, I would.
Also, after hearing various convincing arguments for various types of banking systems, including debt-backed, gold-(or other commodity)-backed and then simply currency backed only by it being an acceptable means with which to pay tax – I agree with you.
In my opinion, the best type of currency is one that is backed by nothing more than the fact that government accepts it as legal tender for paying tax.
But… I still don’t put the SARB in the same category as The Fed, or the BOE.
My reasons for this are:
1. Their policy over the last few years was inflation targeting, which they stuck to. The SARB kept raising interest rates, while the rest of the world was having a debt party.
Most people attribute the fact that SA is better off than countries like the USA to the national credit act, but really, the NCA was introduced too late to have much of an effect.
It was the SARB’s insistence over the last few years to keep raising rates that was the biggest saving grace of SA.
2. The SARB is privately owned. I don’t know how good this is, but I certainly prefer it.
I’ve also heard all the arguments for why the central bank of a country should be government owned.
However, the more I thought about it, the less I liked the idea of the SARB being government owned.
Perhaps it is because my views are more capitalistic. Or perhaps it is just because of the reputation of our government.
Either way, I don’t like the idea of government having total power over the supply of money in my country, especially not a government that is notorious for being corrupt and one that has several loose cannons who will quite happily collapse an industry to make a socialistic point.
3. Shareholdership in the SARB is restricted.
According to the SARB’s website:
This is obviously a good thing. It prevents power to be too narrowly allocated.
4. Ignorance
I admit, I don’t know enough yet about the SARB to have a really solid opinion.
Me saying that the SARB has the best interest of South Africans at heart, is based on a few facts, but for the rest, not much more than my gut feel about it.
For example, the regulation I mentioned in point (3) was only introduced after the establishment of the SARB. Shareholders who, at that time, owned more than 10000 shares in the SARB, were allowed to keep their shares, but not buy any more.
Who the major SARB shareholders are currently, and how many shares they hold, I don’t know. I’ll try and find out.
Another thing I don’t know is simply this – how much exactly does the SARB owe to the IMF/World Bank? Is all our currency debt-backed?
I suspect not. I think much of our currency is still backed by gold and foreign currency reserves. But alas, I don’t know.
Do you have any figures Chris?
Please also share what is your opinion – what would be the best banking system for SA?
August 5th, 2010 at 02:41 am
Francois,
A most interesting and valuable website.
You have given prime interest rates for a long period, but for the period 1985 to 2001, what were the approximate bank interest rates on deposits for this period?
If someone had 8,000,000 Rands in bank accounts in 1985, roughly how much would this have accrued to up to 2001, before tax and living expenses? I appreciate that this is like asking how long is a piece of string, but some indication would be appreciated.
Many thanks
Rhonnie
August 29th, 2010 at 10:29 am
@Rhonnie
Banks can set their own interest rates on per-account basis.
It would greatly vary between banks and the specific account you took with the bank.