Hi Money makers,
It’s your favorite content creator, TalkingCents.
In today’s article I’m going to be talking about the central bank of South Africa, otherwise known as the South African Reserve Bank (SARB).
Mark you Calendar
On Thursday the 25th of January, it will be the first Monetary meeting of 2024, but it will be the 14th meeting since the hiking cycle began in November 2021.
Here are the dates for the upcoming interest rate decisions for 2024.
𝟮𝟱𝘁𝗵 𝗝𝗮𝗻𝘂𝗮𝗿𝘆𝟮𝟳𝘁𝗵 𝗠𝗮𝗿𝗰𝗵𝟯𝟬𝘁𝗵 𝗠𝗮𝘆𝟭𝟴𝘁𝗵 𝗝𝘂𝗹𝘆
𝟭𝟵𝘁𝗵 𝗦𝗲𝗽𝘁𝗲𝗺𝗯𝗲𝗿
𝟮𝟭𝘀𝘁 𝗡𝗼𝘃𝗲𝗺𝗯𝗲𝗿
I am of the view that they (SARB) will keep rates 𝗵𝗶𝗴𝗵𝗲𝗿 𝗳𝗼𝗿 𝗹𝗼𝗻𝗴𝗲𝗿. This means if they do cut, expect it to be only after the Federal Reserve Bank (FED) cuts. Based on the consensus view in the states, it is believed the FED will start cutting interest rates either in their March or May meeting.
That means SARB most likely follows suit and potentially cuts interest rates by 0.25% after the May general election. (July meeting). I believe they (SARB) will wait for inflation to show sustained downwards momentum, in order to keep the real rate higher to attract inflows into South Africa.
December’s inflation print will be released by Statistics South Africa (Stats SA) today (24th January), a day before Thursday’s interest rate meeting. It is safe to assume, in my opinion, that they will leave rates unchanged on Thursday until their masters at the FED give the signal.
The repurchase rate will remain at 8.25% and the prime lending rate will remain at 11.75%
The History of The South African Reserve Bank
The South African Reserve Bank (SARB) is the oldest central bank in Africa, having been established on June 30th, 1921. Prior to this, South Africa had no monetary authority, and it was the responsibility of commercial banks to bring notes into circulation.
It was only because of arbitrage that the SARB came into existence. The price of gold in the United Kingdom rose, and a profit could be realized by converting the banknotes into gold in South Africa and then selling that gold in London - forcing local commercial banks to sell their gold and re-import them at a higher price.
Arbitrage explained:
Banks in South Africa were eventually released from their obligation to convert their banknotes into gold on demand. It then became the responsibility of the central bank (SARB) to hold commercial banks’ gold and issue banknotes. This was known as the Currency and Banking Act of 1920.
This is what led to the establishment of the SARB.
By 1932, South Africa completely abandoned the gold standard, choosing rather to link the value of the local currency to the pound sterling, making this the new monetary policy framework of this era.
In 1944, The South African Reserve Bank Act replaced the Currency and Banking Act of 1920, and the SARB’s initial 25-year period of issuing banknotes was extended indefinitely.
A love Letter for citizens
On the 14th of February 1961, South Africa introduced the Rand just three months before it left the Commonwealth to become a Republic. The Rand replaced the South African Pound at a rate of 2 Rand to 1 Pound
Fast Forward to 1985....
South Africa was experiencing massive capital outflows from debt defaults and economic sanctions; thus, exchange controls were implemented, creating the dual rand system.
These exchange controls set one exchange rate for current account payments for residents and another rate for capital account payments for non-residents. This meant that all foreign investment in South Africa could only be sold for Rands.
The story continues....
The dual system was abolished in 1995 and a new monetary era was ushered in to represent the post-apartheid regime. The South African Reserve Bank Act 90 of 1989 replaced the SARB Act of 1944. The SARBs mandate and primary goal now became, "To protect the value of the currency and to achieve and maintain price stability."
The year is now 2000...
South Africa becomes the 13th country to adopt an inflation-targeting monetary policy framework, with the aim of keeping consumer inflation between 3% and 6%.
Present Moment...
The newest bank notes are brought into circulation post-covid, in early May 2023. Setting the scene for the next chapter of monetary policy framework.
The NOW primary objective of the South African Reserve Bank is to protect the value of the currency in the interest of balanced and sustainable economic growth in the Republic.
The South African Reserve Bank is embedded into the South African Economy and is an important institution for South Africa. In future articles, I will dive deeper into the the consequences of SARB’s actions and how it has become a political talking point.
For now, enjoy the video I made for you :)
South African Reserve Bank Shareholders
There are 2 million issued shares
800+ Shareholders
10c dividend per share (Maximum)
No individual can have more than 10 000 shares
Maximum Value of all dividends = R200 000
R1 000 maximum dividend for each individual
Remaining profits go to the South African Government
110 individuals own +- half of SARBs issued shares
Shareholders:
SA Mutual Life Assurance = 20 000 shares
S.A Police Widow & Orphan = 10 520 shares
ABSA Bank = 10 000 shares
FirstRand Group = 10 000 shares
Discovery Limited = 10 000 shares
CFO of Standard Bank = 10 000 shares
Comp Secretary of Anglo American = 10 000 shares
Agri South Africa = 10 000 shares
Bidvest Bank = 500 shares
Anton Rupert Trust = 200 shares
JP Landman Trust = 200 shares
Dawie Roodt = 200 shares
Nelson Mandela Children fund = 100 shares
That’s it for today.
Stay safe, everyone.
Dave :)