South African Reserve Bank
Office of the Governor
2010-03-16

Dear Shareholder

I write to you against the backdrop of the recent public discussions around the South African Reserve Bank ("SARB" or "Bank"), specifically on the most appropriate operational structure for the institution and how it should best perform its duties.

I do so fully aware of the fact that the vast majority of shareholders who participate in the governance of the Bank do so in full recognition and support of its status as a national asset with the task of serving South Africa's people and its economy.

Freely traded shares have always been an invitation to individuals and institutions to buy into and to participate on an ongoing basis in the national consensus on the Bank's role on behalf of the country. Your responsible exercise of your rights and duties as a shareholder remains a significant contribution to the diversity necessary for the achievement of the very broad consensus on which we operate.

Profit making should never be a motive for holding shares in the Bank. The Bank is neither designed nor expected to maximise profits. The fixed dividend paid and the limited voting rights available to private shareholders underline the fact that the Bank, like its counterparts in other countries, is a public entity that acts in the public interest.

Responsible private shareholders help entrench and enhance the Bank's independence. They support its public interest mission. Clearly, a private shareholding in the SARB is first and foremost a service to the nation and to the economy.

Despite your commitment to the Bank as a national asset, and the enormous goodwill towards and trust in the Bank I have heard expressed from across all communities in the country, the institution currently faces a challenge, ostensibly lacking in principle and evidently driven by the self-interested profit motive of a very small minority of shareholders. This small minority does not appear to care about the national interests of the Republic of South Africa.

I am of the view that it is appropriate to reiterate to the Bank's responsible shareholders some of the fundamentals at the core of what the SARB is all about, and how it is designed to function:

(1) Independence of the SARB is entrenched in the Constitution:

• The private shareholding is designed to enhance this independence;
• the SARB is a legal person in its own right;
• central banks worldwide are regarded as public entities that fulfil public interest roles;
•  the SARB is required to conduct its activities in the public interest and is not required or designed to maximise profits; and
• as with those other central banks around the world open to external shareholders, freely traded shares are an invitation to individuals and institutions to buy into and to contribute to the national consensus on the Bank's role on behalf of the country. A diversity of stakeholders with a common purpose remains a key intention of the Reserve Bank Act, of the SARB, of the Government and should be the intention of all serious shareholders.

(2) The role of private shareholders in the SARB is not to determine the Bank's purpose or conduct and they have a limited and indirect role in the governance of the Bank. This role is exercised primarily through the directors elected by shareholders (who comprise seven of the fourteen board members), and private shareholders have no direct role in the operations of the Bank.

(3) Shareholders in the SARB are governed by the South African Reserve Bank Act and consequently they are not authorised to:

• appoint or remove the Chief Executive Officer of the Bank (in the case of the Bank, the Governor is appointed by the President);
• alter the stwcture, purpose or conduct of the institution; and
• shareholders of the Bank do not share in profits, but instead receive a fixed return on their shares and they may only elect 50 per cent of board members.

(4) The reason a single shareholder may not hold more than 10,000 shares in the Bank is primarily to prevent individuals and companies or other entities from exercising undue influence over the control of the SARB. This is underlined by the fact that voting is restricted to one vote for every 200 shares held, with a maximum of 50 votes per shareholder.

(5) Directors should be fit and proper persons to hold their positions, and they owe a fiduciary duty and a duty of care and skill to the Bank. This requires that they should act in good faith and possess the level of knowledge, expertise and experience required to at all times adequately fulfil their roles as directors of the Bank.

(6) The Bank is the custodian of two types of reserves:

• The national reserves held in foreign currencies and precious metals on behalf of the country; and
• contingency reserves built up over a period of time specifically to empower the Bank to deal with adverse conditions and unexpected shocks.

You will, I believe, agree with me that those among the Bank's shareholders who do not subscribe to the legal framework and national consensus described above cannot claim to be acting in the interests either of the Bank, the people of South Africa, or the nation's economy.

Yours sincerely,
Gill Marcus
Governor

Statement issued by the SA Reserve Bank, March 16 2010 (transcribed from the PDF)

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