The Annual General Meeting of the shareholders of the South African Reserve Bank has just been concluded. The Bank’s Board of Directors discussed, amongst others, the outcome with respect to two issues: the proposal for amending section 24(e) of the SARB Act and the election of a shareholders’ representative on the Board.With respect to the amendment of section 24(e), the shareholders supported a motion to amend the section by substituting the words “the payment to the shareholders, out of net profits, of a dividend at the rate of ten per cent per annum on the paid-up share capital of the Bank, one tenth shall be allocated to the reserve fund of the Bank” by the words [of net profits] “one tenth shall be paid to the shareholders and nine tenths shall be paid to the Government”. If the SARB Act is amended accordingly, shareholders will no longer be paid a dividend of 10c per share per annum, but will be entitled to share in one tenth of the net profits of the Bank. The Board opposes such an amendment because the concept of shareholders sharing in the profits of a company applies to companies incorporated with a profit motive. The premise that shareholders are “owners” of the company gives rise to the notion that the maximisation of profits is to build shareholders’ wealth. These principles of corporate law, however, are not applicable to the Bank.  The Bank, since its formation in 1921 in terms of the Currency and Banking Act, constitutes a public interest, non-profit-maximising, non-competitive statutory corporation. Like central banks in other countries, it has a unique position in the economy and its primary objective is to achieve and maintain price stability, which objective it needs to pursue without fear, favour or prejudice. This function relates, in our specific case, to the achievement of the inflation target as set by the Government.                                Owing to its public sector role, it was envisaged that control over the Bank is achieved by a balance of power between Government and the private sector. It is therefore evident that the introduction of the system of private shareholding in the Bank was done, not with a profit sharing motive in mind, but primarily with a corporate governance objective. The amendment as recommended by the shareholders puts the spotlight on the very unusual private shareholding structure created by the SARB Act, if looked at from international best practice of central banks. Central banks typically do not have private shareholders, but are owned by their respective governments. Indeed very recently, the Bank for International Settlements (BIS) abolished the practice of having private shareholders so that only member central banks are shareholders. The way forward for the Bank might well require the abolition of the private shareholding structure. The proposed amendment will constitute a major change in the public service obligations of the SARB Act and will, owing to the Bank’s unique role in the economy, not be in the public interest. The resolution will nonetheless be submitted to the Minister of Finance for his consideration, although the Board will strongly recommend against its implementation.  Following the election of Mr Stephen M. Goodson by shareholders, he becomes a member of the Board of Directors with effect from 27 August 2003. In summary, the Bank remains committed to international best practice in all aspects of central banking, including corporate governance and legislative frameworks. In the light of today’s events, initiatives to review the enabling legislation (SARB Act) of the Bank will be speeded up to align the Bank with international best practice.