South African Reserve Bank Governor Lesetja Kganyago has a fight on his hands to protect the central bank’s US$50 billion of reserves.
More than eight months after the ruling African National Congress decided that the 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.
However, also at risk may be billions of US 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 (US$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, Kganyago said.
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.”
The rand last month slumped to its weakest level against the US dollar in two years as upheaval in Turkey spilled over into other emerging markets. The currency was 0.2 percent lower at 14.7115 per US dollar as of 7:16am in Johannesburg yesterday.
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 the Witwatersrand.
He is a former secretary at the Reserve Bank and owns its shares.
South Africa had US$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.
“Why should we be paying people who are in any case at the moment very constrained,” Kganyago said.
Kganyago, the 52-year-old former head of the National Treasury, fought off a proposal by the nation’s anti-graft ombudsman last year to change the constitution to take away the regulator’s inflation-target mandate.
Last month, the Economic Freedom Fighters political party, which has won support by vowing to nationalize everything from land to banks, tabled a bill to make the Reserve Bank state-owned.
If the law is passed, the change would be mainly cosmetic. That is unless it is used as a gateway to meddle with the mandate again, the governor said.
“Is this a Trojan horse?” Kganyago said. “If it leads to a point that there’s that debate about the mandate of the bank and the independence of the Reserve Bank — check what happened with Turkey, check what happened in Argentina, check what happened in Venezuela. If you want an African example, check what happened in Zimbabwe.”
“Should they interfere with our independence, they’ve got a fight on their hands,” he said.
The maximum price over the past six months for a Reserve Bank share, which is available over the counter since the bank delisted in 2002, has been 10 rand. Investors share a maximum dividend payout of 200,000 rand a year.
The stock is a “horrible investment,” said shareholder Dawie Roodt, the chief economist at financial services company Efficient Group Ltd.
He bought his shares more than two decades ago because they allow him access to the central bank’s annual meetings, where he can speak to its managers, Roodt said.
Previous governors had an acrimonious relationship with some shareholders. Tito Mboweni accused one of disrespect in 2009 when the barefoot investor dressed in lederhosen, a traditional Bavarian garment, disrupted the annual general meeting.
During Kganyago’s four years at the helm, those gatherings have become duller affairs that last less than an hour.
If the government does become the sole owner of the bank, the meetings could be over in minutes, he said.
The central bank would prefer to leave things as they are. Should nationalization take place, Kganyago will up give up the nation’s assets or allow tinkering with the mandate.
“If there’s a dispute over these things, you can rest assured that we will have protracted fights in the courts,” he said. “Arbitration can rule either way, but the legal costs associated with that are going to be massive, there’s no doubt about that.”
CONFRONTATION: The water cannon attack was the second this month on the Philippine supply boat ‘Unaizah May 4,’ after an incident on March 5 The China Coast Guard yesterday morning blocked a Philippine supply vessel and damaged it with water cannons near a reef off the Southeast Asian country, the Philippines said. The Philippine military released video of what it said was a nearly hour-long attack off the Second Thomas Shoal (Renai Shoal, 仁愛暗沙) in the contested South China Sea, where Chinese ships have unleashed water cannons and collided with Philippine vessels in similar standoffs in the past few months. The China Coast Guard and other vessels “once again harassed, blocked, deployed water cannons, and executed dangerous maneuvers” against a routine rotation and resupply mission to
GLOBAL COMBAT AIR PROGRAM: The potential purchasers would be limited to the 15 nations with which Tokyo has signed defense partnership and equipment transfer deals Japan’s Cabinet yesterday approved a plan to sell future next-generation fighter jets that it is developing with the UK and Italy to other nations, in the latest move away from the country’s post-World War II pacifist principles. The contentious decision to allow international arms sales is expected to help secure Japan’s role in the joint fighter jet project, and is part of a move to build up the Japanese arms industry and bolster its role in global security. The Cabinet also endorsed a revision to Japan’s arms equipment and technology transfer guidelines to allow coproduced lethal weapons to be sold to nations
Thousands of devotees, some in a state of trance, gathered at a Buddhist temple on the outskirts of Bangkok renowned for sacred tattoos known as Sak Yant, paying their respects to a revered monk who mastered the practice and seeking purification. The gathering at Wat Bang Phra Buddhist temple is part of a Thai Wai Khru ritual in which devotees pay homage to Luang Phor Pern, the temple’s formal abbot, who died in 2002. He had a reputation for refining and popularizing the temple’s Sak Yant tattoo style. The idea that tattoos confer magical powers has existed in many parts of Asia
ON ALERT: A Russian cruise missile crossed into Polish airspace for about 40 seconds, the Polish military said, adding that it is constantly monitoring the war to protect its airspace Ukraine’s capital, Kyiv, and the western region of Lviv early yesterday came under a “massive” Russian air attack, officials said, while a Russian cruise missile breached Polish airspace, the Polish military said. Russia and Ukraine have been engaged in a series of deadly aerial attacks, with yesterday’s strikes coming a day after the Russian military said it had seized the Ukrainian village of Ivanivske, west of Bakhmut. A militant attack on a Moscow concert hall on Friday that killed at least 133 people also became a new flash point between the two archrivals. “Explosions in the capital. Air defense is working. Do not