Business Day
BU S I N E S S DAY.CO. Z A
Friday 25 July 2025
Business Law & Tax Review
Bank nationalisation back in the spotlight SARB Amendment Bill is likely to have implications for investor confidence
Contentious aspect The most contentious aspect of the SARB Amendment Bill is probably the proposal to expropriate all Bank shares without compensation to the existing shareholders. Any such expropriation must be assessed in light of the constitution and the Expropriation Act of 2024. The constitution permits expropriation only if it is: “(a) for a public purpose or in the public interest; and (b) subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those
By PAUL RUSSELL Nortons Inc
Arbitration is a way of resolving a dispute outside of the court system, known as alternative dispute resolution, and involves the parties to a dispute agreeing to enter into arbitration and be bound by the arbitrator’s decision. Mediation, in contrast, involves a process in which a neutral third party, the mediator, facilitates a negotiation between the parties in order to reach a mutually acceptable settlement of their dispute. Mediation is generally less formal than either court litigation or arbitration and does not involve a binding decision. Here are some key aspects relating to finality, appeals and costs when considering the arbitration route versus litigation.
By DEBORAH CARMICHAEL & KATLEHO NTAHALE ENS
The SA Reserve Bank Amendment Bill of 2018 (SARB Amendment Bill) has again become the subject of a vigorous debate following the public hearing held by SA’s parliament on July 2 2025. In essence, the SARB Amendment Bill proposes to nationalise the South African Reserve Bank (the Bank) by: (i) making the state the sole shareholder of the Bank and (ii) empowering the finance minister (minister) to appoint all directors of the Bank. A central concern is whether nationalising the Bank would undermine its independence. In this regard, SA’s constitution (the constitution) expressly obliges the Bank to perform its functions independently. This constitutional safeguard is not dependent on who owns the Bank. In fact, the shareholders of the Bank do not influence the policy, regulatory or supervisory decisions of the Bank. It is therefore crucial to clarify what the shareholders are currently able to do. The South African Reserve Bank Act of 1989 (the SARB Act) limits the shareholders’ functions to: (i) considering annual financial statements; (ii) electing half of the nonexecutive directors (the board); and (iii) appointing external auditors. If the minister were to assume all these roles, the practical impact on the Bank should, in theory, be minimal. First, the minister already has access to the annual financial statements of the Bank. Second, the board (regardless of how it is constituted) must already consult the minister when performing its functions. Last, external auditors are, in any case, required to operate independently and in accordance with international standards. In this regard, it is crucial to also consider the International Monetary Fund’s working paper of 2024 (the IMF Paper), which sets out “a new measure of Central Bank independence”. The IMF Paper challenges the existing view that a central bank’s board is more independent if appointed by private shareholders, noting that this perspective “is no longer fully aligned with current views on central bank independence”. At the same time, the IMF Paper cautions against a model in which the board is appointed solely by the state. These guidelines seem to support the SARB Amendment Bill in making the state the sole shareholder of the Bank, while opposing the proposal that the board be appointed solely by the minister.
Litigation vs arbitration: finality, costs and appeals
Finality and appeals Arbitration proceedings are not subject to appeal (unless an appeal is provided for in the arbitration agreement), but are, in limited instances, subject to review. Court litigation caters for an appeal process and judgments in the lower courts may be overturned on appeal.
Costs SA finance minister Enoch Godongwana (left) and Reserve Bank Governor Lesetja Kganyago share a moment after the press conference concluding the G20 finance meeting in Durban earlier this month. REUTERS
affected or decided or approved by a court.” The Expropriation Act generally aligns with the constitution, except in certain cases involving land expropriation for nil compensation. As the SARB Amendment Bill concerns shares rather than land, the prevailing legal framework in SA would
The Bank is one of only nine central banks that still has private shareholders. Most central banks globally are wholly state-owned require the state to compensate shareholders for their shares. The SARB no longer publishes its shareholders’ register online due to the Protection of Personal Information Act of 2013 (Popi), which came into effect in 2021. The last publicly available shareholders’ register reflected a diverse mix of local and international investors, which included both organisations and individuals. Some of the most notable names in that register were the Nelson Mandela Children’s Fund, the Anton Rupert Trust and the late former finance minister Tito Mboweni. Following the Popi Act, anyone wishing to inspect the latest shareholders’ register may do so at the Bank’s head office, subject to prior arrangement. Another key consideration, especially from the public’s perspective, is whether the state can afford to acquire all Bank shares. The market value of Bank shares is not publicly available as they are not listed on a stock exchange and are
traded on an over-the-counter market. However, based on the share price data published by the Bank on July 8 2025, it would cost the state about R20m to acquire all shares in the Bank at value. This suggests that affordability, while a factor, is unlikely to prohibit the state from adopting the SARB Amendment Bill.
Investor confidence Despite constitutional and legislative protections, the SARB Amendment Bill is likely to have implications for investor confidence. Most investors regard the independence of a central bank as the most crucial safeguard against politically motivated monetary policy. However, as most investors ought to know, nationalising the Bank would not be an anomaly. In fact, the Bank is one of only nine central banks that still has private shareholders. Most central banks globally are wholly state-owned and yet maintain operational independence. It seems that the most crucial question should not be whether the Bank is owned by the state or by private shareholders, but rather, whether its operational independence is maintained. Provided that constitutional protections are upheld, nationalisation of the Bank should not, in itself, compromise the Bank’s ability to perform its functions.
The IMF Paper challenges the existing view that a central bank’s board is more independent if appointed by private shareholders
Court litigation costs usually involve the fees for attorneys, advocates, the sheriff and any additional disbursements. However, the parties are not responsible for the payment of the judicial officer, the preparation of the judgment or the venue. The judicial officer has the discretion to grant a costs order against the unsuccessful party. The costs of an arbitration typically involve the arbitrator’s fee, the costs of the legal practitioners, experts, the venue and catering (where applicable). The parties can agree on how the costs of the arbitration proceedings will be apportioned. The arbitrator’s fees are usually agreed between the parties and the arbitrator. The Arbitration Act provides that, unless the arbitration agreement provides otherwise, the award of costs shall be in the discretion of the arbitrator. In summary, there are a number of significant advantages to arbitration, not least of which are that the process is confidential, can be tailored to suit the particular circumstances of the parties and, provided both parties agree, can be much faster and simpler than court litigation. Arbitration can also help those involved deal with matters with less conflict than protracted litigation and so help to preserve business relationships. As far as costs are concerned, while it is true that, in the case of arbitration, the parties have to pay the arbitrator’s fee and for the venue (which are costs they would not be exposed to in the case of litigation), the fact that arbitration is usually considerably faster and more streamlined generally keeps expenses lower. It can be expensive in litigation to have a hearing cancelled at the last minute after the legal teams have fully prepared (with the result that they will need to spend time refreshing in the future when a hearing is rescheduled). However, as noted at the outset, not all disputes are suited to arbitration and there may be particular features of a dispute which may make it better suited to court litigation.