The South African Reserve Bank (SARB) Governor Lesetja Kganyago has once again challenged one of the country's longest-running economic debates: whether the State should become the sole shareholder of the central bank.
His argument is striking in its simplicity. Nationalising the SARB's private shareholding, he argues, would change almost nothing operationally while potentially costing taxpayers billions of rand and sending an unnecessary signal of political interference to domestic and international investors.
Those remarks have gained renewed significance following parliamentary hearings on the SARB Amendment Bill, originally introduced by Economic Freedom Fighters leader Julius Malema in 2018.
The Bill seeks to transfer all privately held SARB shares to the State, giving the Minister of Finance the rights currently exercised by shareholders and altering the governance arrangements of the bank's board.
The debate illustrates an important distinction that is often lost in political discourse: ownership of the SARB is not the same as control of monetary policy.
In a recent private luncheon with a group of journalists, Kganyago argued that many proponents of nationalisation mistakenly assume private shareholders exercise meaningful control over the Reserve Bank. In reality, he said, their rights are exceptionally limited.
Private shareholders collectively receive a maximum dividend of approximately R200,000 annually, while virtually all remaining profits are transferred to the National Treasury. Individual shareholders are capped at holding 10,000 shares, voting rights are heavily restricted, and shareholders have no authority over monetary policy or the constitutional mandate of the Bank.
"The obsession with the R200,000 dividend," Kganyago argued, "misses the point."
"South African politicians would like to believe that it is their idea to nationalise the bank. It is not their idea. It has been driven by a foreign shareholder who has run around offices trying to convince every politician that this must be done. We've been in court with him. We won."
His broader message was that ownership and policy are separate issues. The SARB's mandate is entrenched in Section 224 of the Constitution, requiring it to protect the value of the currency in the interests of balanced and sustainable economic growth. Simply replacing private shareholders with the State would not alter that mandate.
"If you want to change the Reserve Bank, change the Constitution. Nationalising the bank changes nothing," Kganyago argued.
That view is not unique to the Governor. The National Treasury adopted a similar position during recent parliamentary hearings.
Deputy Director-General Christopher Axelson, who's the head of tax and financial sector policy, recently acknowledged that complete State ownership may appear desirable in principle. However, he argued that the proposed legislation introduces significant legal, constitutional and economic risks while offering little practical benefit.
Among Treasury's principal concerns are:
- the cost of compensating existing shareholders;
- possible litigation from foreign investors protected under bilateral investment treaties;
- constitutional concerns regarding expropriation;
- potential damage to investor confidence; and
- perceptions that the legislation could represent a first step towards political interference in monetary policy.
Perhaps Treasury's most significant argument concerns perception rather than substance.
Even if nationalization does not legally change the SARB's independence, markets could interpret it as signaling future political influence over monetary policy. For a country already battling low growth, fiscal constraints and fragile investor confidence, Treasury believes such perceptions carry real economic costs.
As Axelson noted, central bank credibility is built not only on legal protections but also on market confidence that governments will respect institutional independence.
Interestingly, much of Kganyago's argument echoes conclusions reached a few years ago by University of Cape Town researcher David Hauptfleisch.
His 2018 master's thesis examined perhaps the most misunderstood question surrounding the SARB: do shareholders actually own the bank?
Using the legal ownership framework developed by A.M. Honoré, Hauptfleisch concluded they do not.
Unlike shareholders in listed companies, Sarb shareholders possess virtually none of the recognised legal incidents of ownership. They cannot influence monetary policy, cannot amend the bank's constitutional framework, cannot liquidate the institution and have only narrowly defined governance rights.
His research also found little evidence that shareholders own Sarb shares for financial gain. Share prices have shown limited appreciation, dividends are fixed and modest, and liquidity is low.
Most importantly, Hauptfleisch concluded that if the Reserve Bank's directors and Monetary Policy Committee retained their existing autonomy, nationalising the private shareholding would have no significant financial, operational or corporate governance effect on the institution itself.
His provocative conclusion was that the real political debate is not about ownership of SARB shares at all. Rather, it concerns broader questions about who should influence South Africa's monetary system and the commercial banking sector's role in money creation.
Supporters of the Amendment Bill acknowledge many of these practical realities but argue that symbolism matters.
At the height of the Amendment Bill debate, Cosatu told Parliament that South Africa remains an international outlier by retaining private shareholders in its central bank. There are between 8 and 9 central banks globally that feature varying degrees of private shareholding or hybrid public-private ownership.
In Cosatu's view, sole State ownership would strengthen democratic legitimacy and reinforce the principle that monetary institutions exist to serve the public rather than private interests.
The federation also criticised the SARB's conservative interest-rate policy and argued the bank should play a stronger developmental role in addressing unemployment and inequality.
Those arguments reflect a broader political view that central banks should contribute more actively to economic transformation rather than focusing narrowly on inflation.
However, the question is whether changing ownership alone would achieve those objectives?
The irony is that both supporters and opponents increasingly acknowledge the same underlying reality: Nationalisation, by itself, would have little operational impact. The disagreement concerns what it represents.
Supporters believe sole State ownership would eliminate an historical anomaly and strengthen national sovereignty. Opponents believe it risks creating precisely the perception markets fear—that political leaders ultimately seek greater influence over monetary policy.
That concern is reinforced by the governance changes proposed in the Bill, which would transfer greater appointment powers to the Minister of Finance. Although monetary policy decisions would formally remain unchanged, critics argue that governance structures contribute to institutional independence and credibility.
The SARB itself addressed this issue more than a decade ago.
Back in 2010 responding to earlier calls for nationalisation, the bank stated that it "is not owned by anyone." Rather, it is a constitutional institution established by statute, with shareholders participating only in limited aspects of governance to enhance transparency and accountability.
That description remains remarkably consistent with Kganyago's current position.
The debate therefore raises a broader policy question.
If nationalisation changes neither the bank's constitutional mandate nor the conduct of monetary policy, why pursue it?
Kganyago's answer is that government resources would be better directed towards fixing South Africa's failing infrastructure, improving public services and restoring economic growth than purchasing shares that confer almost no operational control.
"There are a lot of other [State] institutions that are not functioning. Why are we obsessed with breaking the one that is working? What would it change? Zero. If you want to change the banking of the reserve bank, go and change the Constitution.
"But nationalising the Reserve Bank doesn't change our mandate. Our mandate is to protect the value of the currency. And you might ask us to do other things. But if other things were to be done, the Constitution says they will always be subject to our primary mandate."
Ι Siphelele Dludla is editor of The National.