The South African Reserve Bank (SARB) (Afrikaans: Suid-Afrikaanse Reserwebank) is the central bank of the Republic of South Africa. It was established in 1921 after Parliament passed an act, the "Currency and Bank Act of 10 August 1920", as a direct result of the abnormal monetary and financial conditions which World War I had brought. The SARB was only the fourth central bank established outside the United Kingdom and Europe, the others being the United States, Japan and Java. The earliest suggestions for the establishment of the Central Bank in South Africa date back to 1879.

The primary purpose of the Bank is to achieve and maintain price stability in the interest of balanced and sustainable economic growth in South Africa. Together with other institutions, it also plays a pivotal role in ensuring financial stability.

History 

Owing to its unique role as a central bank, some people are under the impression that the Reserve Bank was the first banking institution to be established in South Africa.  This, is not the case however.  The first bank to be established in South Africa was the Lombaard Bank in Cape Town, which opened its doors for business on 23 April 1793. 

The earliest proposals for the establishment of a central bank in South Africa were made as far back as 1879 - calls that were repeated for the following few years, until a select committee, consisting of the ten members of Parliament was established on 31 March 1920 to examine the practicalities of establishing a central bank. 

Following on the recommendations of the committee, the South African Reserve Bank opened for business on 30 June 1921, making it the oldest central bank in Africa. The first banknotes were issued to the public by the Bank on 19 April 1922.

Mandate 

The Reserve Bank is required to achieve and maintain price stability in the interest of balanced and sustainable economic growth in South Africa. 

The achievement of price stability is quantified by the setting of an inflation target by Government that serves as a yardstick against which price stability is measured. The achievement of price stability is underpinned by the stability of the financial system and financial markets. For this reason, the Bank is obliged to actively promote financial stability as one of the important determinants of financial system stability.

At present, sections 223 to 225 of the Constitution of the Republic of South Africa, 1996, the South African Reserve Bank Act, 1989 as amended and the regulations framed in terms of this Act, provide the enabling framework for the Bank's operations. The Bank has a considerable degree of autonomy in the execution of its duties.

In terms of section 224 of the Constitution, 1996, "the South African Reserve Bank, in pursuit of its primary object, must perform its functions independently and without fear, favour or prejudice, but there must be regular consultation between the Bank and the Cabinet member responsible for national financial matters." The independence and autonomy of the Bank are therefore entrenched in the Constitution.

The Bank has been entrusted with the overarching monetary policy goal of containing inflation. The Bank can use any instruments of monetary policy at its disposal to achieve this monetary policy goal. This implies that the Bank has instrument independence in monetary policy implementation but not goal independence in the selection of a monetary policy goal.

The Governor of the Bank holds regular discussions with the Minister of Finance and meets periodically with members of the Parliamentary Portfolio and Select Committees on Finance. In terms of section 32 of the South African Reserve Bank Act, 1989, the Bank publishes a monthly statement of its assets and liabilities and submits its Annual Report to Parliament. The Bank is therefore ultimately accountable to Parliament.

Functions 

The primary function of the Reserve Bank is to protect the value of South Africa's currency. 

In discharging this role, it takes responsibility for:

• Ensuring that the South African money, banking and financial system as a whole is sound, meets the requirements of the community and keeps abreast of international developments;
• Assisting the South African government, as well as other members of the economic community of southern Africa, with data relevant to the formulation and implementation of macroeconomic policy; and 
• Informing the South African community and all stakeholders abroad about monetary policy and the South African economic situation.

Government Of South Africa