The South African Reserve Bank is the central bank in South Africa. It dates back to 1921, making it among the oldest outside Europe. Unlike many central banks, the South African Reserve Bank is not directly controlled by the government.
The bank was created by the Currency and Banking Act, No 31 of 1920. Its initial role was to be the single institution responsible for issuing banknotes and holding gold. Before this time, commercial banks could issue banknotes but had to exchange them for gold upon demand. This caused problems when speculators realized they could exchange notes for gold in South Africa, then sell the gold overseas where the price of gold was higher. As banks were required to hold gold to back their notes, the banks then had to buy gold from overseas, losing money on the transactions.
Today, the South African Reserve Bank fulfills multiple functions beyond issuing notes. It provides some banking services to the central government. It also oversees the movement of government money between different banks. This can be used to control the amount of cash each bank has on hand and thus control their liquidity.
Another function of the bank is to collect, interpret, and publish economic data. It publishes quarterly bulletins and an annual report, along with occasional one-time documents. These are then treated as the official sources of data for researchers and those making economic policy decisions.
As with many central banks, the South African Reserve Bank is responsible for monetary policy. This includes carrying out activities designed to influence both short-term and long-term money markets for borrowing and saving. The idea is that in turn, this affects how much money is available in order to make borrowing for investment affordable while keeping inflation under control.
The South African Reserve Bank also holds cash reserves for commercial banks. It retains the right to change the requirements for these reserves, a right that can be used as a tool to control money supply. The central bank is also responsible for overseeing the system by which commercial banks move money back and forth, for example when a customer from one bank writes a check payable to a customer of another bank.
In many countries, the central bank is wholly or largely controlled by the national government. This is not the case with the South African Reserve Bank, which is constitutionally required to act independently of the government. It is, however, required to consult regularly with the government minister responsible for finance. The bank must also submit an annual report to South Africa's parliament and is thus answerable to parliament rather than the government.
