South African Reserve Bank
The South African Reserve Bank (SARB) and the National Treasury (ministry of finance) together constitute the monetary authority in South Africa.
The SARB acts as the central bank for the country and its banking institutions, is co-responsible for formulating South Africa's monetary policy, and is largely responsible for implementing this policy.
The Reserve Bank has a significant degree of autonomy in terms of South Africa's Constitution and performs its functions independently, although it holds regular consultations with the minister of finance.
Its primary goal, as defined in the Constitution, is to protect the value of the currency. This requires the achievement and maintenance of financial stability.
The SARB sees it as essential that South Africa has a growing economy based on
the principles of a market system, private and social initiative, effective competition, and social fairness. It recognises the need to pursue balanced economic policies that enhance both development and growth.
It formulates and implements policies in such a way that the country's monetary and banking system remains sound, meets the requirements of the country and its people, and keeps abreast of international financial developments.
The Bank is managed by a board of 14 directors representing commerce, finance, industry and agriculture. Seven directors are elected by the Bank's shareholders. The President of South Africa appoints the governor, three deputy governors and three other directors to the board.
The SARB's management, powers and functions are governed by the South African Reserve Bank Act of 1989.
Monetary policy, money supply, inflation
The Reserve Bank implements South Africa's monetary policy and regulates the
supply (availability) of money by influencing its cost.
Monetary policy is guided by the SARB's assessment of current and prospective economic developments, on the one hand, and the objective of achieving and maintaining financial stability, on the other.
Consistent combating of inflation is a cornerstone of policy. The Reserve Bank adopted a formal inflation-targeting policy framework in 2000.
Monetary policy is set by the Reserve Bank's monetary policy committee, which comprises the SARB's governors and other senior officials and meets every six weeks.
Central bank, custodian of reserves
The SARB acts as the central bank for the country and its banking institutions. It provides accommodation to banks and is the custodian of the statutory cash reserves which all registered banks are required to maintain. It also provides facilities for clearing and settlement of inter-bank obligations.
In 1998 the SARB implemented a system of repurchase transactions (repos) as the main instrument for managing liquidity in South Africa's money market. The repo rate, the price at which the central bank lends cash to the banking system, has become the most important indicator for short-term interest rates.
The repurchase agreements entered into between the Reserve Bank and banks in South Africa are conducted on the basis of an outright buy-and-sell transaction, with full transfer of ownership of underlying assets. The system also provides for a "marginal lending facility", available to banks at their initiative to bridge overnight liquidity needs.
The marginal lending facility forms an integrated part of the South African Multiple Option Settlement (Samos) system, which also came into operation in 1998. This enables banks to make payments to and receive payments from the Reserve Bank.
The Reserve Bank has various instruments to achieve its objectives. These include changes in the marginal lending facility; open-market transactions, including selling its own debentures; changes in requirements with regard to cash reserves of banking institutions; and controlling the liquidity in the money market through repurchase transactions.
The Bank undertakes national and international transactions on behalf of the state, and acts for the government in transactions with the International Monetary Fund.
The Bank is the custodian of the greater part of South Africa's gold and other foreign exchange reserves.
The Reserve Bank controls the South African Mint Company, and issues banknotes printed by the South African Bank Note Company, a wholly owned subsidiary of the Bank.
Source: Government Communication and Information System
