Who owns the South African Reserve Bank?
The South African Reserve Bank (SARB) is a privately owned central bank.
In fact, it is possible for almost anyone to buy shares in the SARB.
Since its establishment, the Reserve Bank has always been privately owned. Today the Bank has more than 630 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 individual shareholder may hold 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.
Is it a good thing for a central bank to be privately owned?
Let me issue and control a nation’s money and I care not who writes its laws.
If we believe Rothschild, then I suppose the answer to my question is:
It depends on who does the owning.
I mulled over the fact that the SARB is privately owned for several days.
After carefully weighing up all the factors and, given the SARB’s and our government’s track records, I realized that I definately sleep better at night, knowing that our central bank is privately owned.
I find articles like this one rather bothersome.
April 19th, 2009 at 01:05 pm
Brilliant series of articles!
What tickles my noodle is how can somebody own shares in the “company” that creates money when they can effectively control the price of their shares. In other words, if you own enough shares in the SARB, you can theoretically control how much your own share is worth by altering the money supply.
April 19th, 2009 at 01:34 pm
PS, you need a email notification plugin for when people post replies, it’s hard to follow a thread if you don’t know when somebody replied.
April 19th, 2009 at 02:24 pm
@Re@per:
1. Email notification added.
2. I agree with you, it’s ridiculous to buy shares in a company with money that was created and the supply of which is controlled by that company.
However, I have a feeling that the SARB has good intentions. From what I’ve seen, their monetary policy really have been in the best interest of most South Africans.
For example, when looking at the “global economic crisis”, South Africa is quite well off compared to most other countries. This is mostly because the SARB constantly kept hiking the repo rate to combat inflation, since 2006.
If the government owned the SARB, we may have been in an entirely different situation.
April 19th, 2009 at 06:49 pm
We are in a much better situation than the US at the moment and I do agree that if the government had to run the reserve bank, we’d pretty much be in the same situation as Zimbabwe with hyper inflation.
Is the South African Reserve Bank controlled by international “share holders” or are the share holders South African?
Where does the Reserve Bank “borrow” its money from? Is it created out of nothing or is there a world bank from which all reserve banks borrow money?
April 20th, 2009 at 09:29 am
@Re@Per
Those are some very good questions.
I don’t know who the SARB’s shareholders are, and as far as I understand the SARB can just create currency out of nothing. In the past the Rand was linked to physical gold reserves, but currently it is simply paper.
I’m also sure the SARB can borrow from the World Bank and from other countries. If they have done or still do I’m not sure. This is another interesting question – why would you borrow money from someone else if you can just create it yourself?
I know that shareholding is regulated so that
However, this regulation was only brought in some time after the establishment of the SARB. Individuals who owned more than 10,000 shares before may not buy any more shares, but they don’t have to sell the shares they still hold.
Do you have any info?
May 3rd, 2009 at 11:03 pm
Wish I had more info, the only other info I have are from US based sources, which is probably irrelevant to an extend when it comes to South Africa.
What I do know is that the Anglo Boer war might have something to do with this in some way (I believe the shareholders are mostly Brittish), my history is a bit rusty but from what I’ve seen in the documentary The Venus Project, the world bank is known for its tendencies to convert countries into paper based currencies while taking over their natural resources and if I remember correctly, the Anglo Boer War was about exactly that, Britain wanted our gold and Diamonds (which they got in the end)Will dig up some information when I have time, am curious myself.
May 5th, 2009 at 12:10 pm
Any comments on a german shareholder who basicly own(51%) the bank.Surely that does not sound promising.What if he wants out?
May 5th, 2009 at 12:33 pm
@Re@per
Please share if you do find any more info.
@Pierre
This is fascinating.
Where did you find out that there is a German shareholder who holds 51% of the SARB? Is this confirmed or just speculation?
May 19th, 2009 at 02:05 pm
PLEASE WOUD SOMEONE INFORM ME HOW TO BUY SOUTH AFRICAN RESERVE BANK SHARES. I WILL APRECIATE ANY INFORMATION
May 19th, 2009 at 10:02 pm
@Ampie
You can find info on how to buy SARB shares here:
How to buy SARB shares
June 13th, 2009 at 07:57 pm
Is it a wise investment @ R10 a share?
June 14th, 2009 at 02:41 pm
@Ohio
In short, I don’t have the foggiest.
The SARB’s financial statements are here: SARB Financial Statements
I saw that shares are on offer for about R10 per share. But looking at the fundamentals for the SARB is not meaningful. You can’t analyze the SARB like a normal company.
Dividends are limited to 10c per share, i.e. @R10 per share that is a maximum dividend yield of 1%. Which is bad.
Furthermore, excess profits are paid to government – it’s not used for growth or expansion. Who wants to invest in a company like that?
The only reason I can think of to buy shares in the SARB as an investment is for potential capital growth in the share price.
And I think capital growth in the share price will be mostly due to sentiment based almost entirely on browny points for being able to say you own a part of the SARB.
June 20th, 2009 at 11:50 pm
Firstly Francois, thanks for a great article! As a result of my age and lack of knowledge/understanding of the financial markets, this share is affordable enough and to a certain extent, less volatile than those traded on the JSE.
I’m a high school student with some savings, looking for something to invest in as a long term investment. After what you revealed about the SARB, the share looks much less attractive. If I may ask you for advice, should I look at other “over the counter (OTC)” share opportunities? I just would like to use my savings wisely.
June 21st, 2009 at 03:27 pm
@Ohio: If you’re looking for long term, get into the property market (interest rates are down meaning house prices will start to skyrocket in the near future meaning you’ll make your money back on most properties bought on or below market value, especially especially REO deals), if you want to play the stock market, use money that you can afford to lose, experienced stock brokers are making a killing in this bull market, but most are not and even more are losing bigtime.
June 21st, 2009 at 03:08 pm
PS, I’m starting a newsletter containing opportunities and advice for the soon-to-be Tycoon with the idea of being in touch with tycoon minded people which will make new projects easier to pull of in the future, send me your email address and I’ll add you once I have the mailing list up and running.
Email address is jan@mycee.com
June 22nd, 2009 at 09:19 am
@Ohio
Well done for starting to learn about investments while you’re still at school!
I wish I started learning about these things earlier.
It’s difficult for me to give you advice about what to invest in. I don’t know what you want to get out of it, how much money you have available, how quickly you need to be able to convert your investments back to cash, how much risk you want to take and so on.
If you just have a few thousand rand and you want to make a fairly safe investment, that should offer fair growth if you leave it for a few years, I think the best is probably to invest in a unit trust (they pool the money from all the investors in their fund and then invest it in a whole bunch of shares).
I don’t know much about things traded “over the counter”, except that they are usually more risky, because they’re not regulated.
Shares or derivatives traded on an exchange, like the JSE, have to comply with the rules of that exchange. The transactions are also regulated by the exchange.
August 7th, 2009 at 04:04 pm
Thanks for the advice guys! Jan/Reaper, my add is voz5400@yahoo.com
September 11th, 2009 at 07:41 pm
Sorry for going missing for such a long time, been spending day and night testing the ins and outs of everything that could make potential money, got burned here and there (especially when testing out new ideas and stepping into the unknown) but nothing major thanks to stop losses and also found a couple of very lucrative ways of investing, new ways that limits your risk but exponentially increases gains.
Futures and Options trading (as well as a few statistical methods to generate solid income from normal gambling which I consider similar to options and futures trading if you know what influences the outcomes, yet I’ve been getting a constant 30-300% gains over the last 2 months with a few small losses in the beginning)
Investing in the SARB? There’s no way I’m putting money in there, it’ll probably be losing against inflation anyway (something which the property market is very handy for), even bonds have better returns if you do a small bit of research.
My investment / gambling blog is investmentgambler.co.za
Will be posting anything useful I come across on that blog.
Only after seeing how quickly money CAN grow if trading / investing in the right places (also thanks to compounding) did I realise that what Francois is preaching is golden advice, every R1 you invest is another fortune in the future (just don’t squander it on volatile stock, that’s why I prefer options, even if the market goes down, you still make money).
Let’s take a simple example, you drink coffee at a coffee shop every weekday morning and pay R10 for a luxury cup of coffee.
At the end of the month, you’ve blown R200, not a lot of money, but take a look at these figures.
Let’s say you’ve rather invested that R200 (and bought a big pot of coffee to make your own) and managed to get 10% for the month, that R200 would have been R220 now. Next month you add another R200 and get 10% on both for the month.
Month1: R220.00
Month2: R462.00
Month3: R782.00
Month4: R1080.20
Month5: R1408.22
Month6: R1769.04
Month7: R2165.95
Month8: R2602.54
Month9: R3082.79
Month10: 3611.07
Month11: 4192.18
Month12: 4831.40
Which means your daily cup of coffee could’ve turned into almost R5000 in just a year on a very conservative 10% per month. How many other similar expenses do you have?
September 12th, 2009 at 12:55 am
@Re@per
Jan, I’ll be watching, but I need to point a few things out.
10% a month is a really optimistic figure. To earn a return like that you’ll have to take very big risks and, inevitably, you’ll loose out sometimes.
Futures and options are great to leverage and play with large amounts of money, using small amounts of cash, but they’re MUCH more volatile than shares and a lot more risky, especially futures.
In a futures contract you can potentially loose a lot more money than you paid for the futures contract. There are many people (and big institutions, like a few banks lately) that were financially ruined by futures contracts gone wrong.
This type of investing is not for the average Jack or Jane.
If you’re young (i.e. you have a lot of time to try again), are prepared to spend a lot of time learning, researching and planning, have a personality that can handle risk, have no debt and if you only use money you’re 100% prepared to loose (the giving up on your coffee example is a good one), then I’d say sure – go for it.
But for 95% of people I’d recommend to rather stick to more conservative investments.
September 12th, 2009 at 08:04 am
Hi Francois, you are correct, in normal trading conditions, 10% is very optimistic, but in a volatile market like the one we are in today, even 10% a week is possible if you’ve done your homework (I’ve been doing on average 30% a week on small amounts for the last 6 weeks just as an example) and reduce the risk of high risk trading. But stay away if the fear of losing money will keep you awake at night.
Futures are expensive, at R900 per contract and losing on average 5/6 times before hitting the jackpot, you need balls of steel and a solid statistical background to know what you’re doing, otherwise you’re going to wipe yourself in no time!
Using the normal stock market (JSE for example) and deriving the frequency of change of the specific stock (obviously you’ll need a live feed of data and trading on a daily basis), you get a good idea of whether it’s on it’s way up or on its way down; using trigonometric transforms, one can see the angle of change which is a good indication of the market going up or down; using some more math to see where the markets hit rock bottom and where the stock is being sold like pancakes at a flea market – all of this gives about a 70% chance of making massive gains in a volatile market and a 30% chance of losing small amounts (I say small since stop losses minimize your risk of losing a lot of money). Also, moving in and out of the market is expensive, that’s why I’ve decided to rather play with options than actually forking out a fortune on buying the stock itself.
Anyway, my blog is not called Investment Gambler for nothing :p
October 4th, 2009 at 04:22 pm
Where could I find who actualy are the top shareholders in SARB?
October 4th, 2009 at 08:33 pm
@Slawek
I’m not sure if the information is in the public domain, but I think the best bet is to request it from the SARB directly.
If you do obtain the info, please share it here.