The South African Reserve Bank (Sarb) says Public Protecor Busisiwe Mkhwebane’s recommendation that constitutional changes be effected to change the central bank’s mandate is unlawful.
In delivering her findings into an apartheid-era bailout granted to Bankorp, which was acquired by Absa in 1992, Mkhwebane proposed that the Sarb’s primary mandate should be changed such that it promotes balanced and sustainable economic growth while ensuring that the socio-economic well-being of citizens is protected.
Following consultation with its legal team, the Sarb announced that it would challenge Mkhwebane’s proposed remedial actions.
“The Reserve Bank has consulted its legal team and has been advised that the remedial action prescribed by the Public Protector falls outside her powers and is unlawful. The Reserve Bank has been advised to bring urgent review proceedings to have the remedial action set aside. The Reserve Bank has resolved to do so,” it said in a statement.
As per the constitution, the central bank’s primary objective is to protect the value of the currency in the interests of balanced and sustainable growth. The Sarb argues that the Public Protector’s recommendations would strip it of its “key competency to protect the value of the currency and the well understood role that central banks play in securing price stability”.
“The remedial action proposed will have a negative impact on the independence of the Reserve Bank,” it added.
Mkhwebane’s recommendations triggered a sell-off in the rand and a weakening of government bonds on Monday, in part, as fears over the Sarb’s on-going independence arose.
Shares in Absa owner Barclays Africa Group also came under pressure after the Public Protector recommended that government recover R1.12 billion from the unit, which she found to have benefited from an “illegal gift” with respect to the Bankorp bailout.
Mkhwebane said allegations, contained in a CIEX report, that government and the Sarb improperly failed to recover funds from the bank were substantiated. She also said the conduct of government and the Sarb was improper and constituted maladministration, adding that the public was prejudiced by their conduct.
Absa denied any wrongdoing saying that it had met all its obligations regarding the loan granted in October 1995.
The Sarb said it will address “its other concerns with the report and evidential factual inaccuracies therein” at the appropriate time, adding that it acts in terms of its constitutional mandate in the interests of the welfare of all South Africans.
Tito Mboweni posted this comment on Facebook on Monday regarding the Public Protector’s report:
THE PUBLIC PROTECTOR’S REPORT ON ABSA
1) I am away on business, currently in London but on my way to Zurich and New York. As such, I have not seen the report of the PP on the allegations regarding the so-called bailout of ABSA and the role of the South African Reserve Bank.
2) I have read all the media reports but feeling disadvantaged by not having the report in my hands. I should find the report on the website of the PP. Looking for it as I write these notes. Thanks to today’s technologies.
3) For the record, I was Governor of the SA Reserve Bank from 1999-2009. I hope that I served in that position fairly and professionally. So I think but some amongst us might have a different view. That is normal in a democracy. I have absolutely no problem or issues with that.
4) Some amongst us might recall that when Julius Caesar was assasinated by his close confidantes, Mark Anthony stood up and said something like: “I come here to bury Caesar and not to praise him. He was my friend faithfull and just to me”. Towards the end of the tragedy, he, Mark Anthony said something like this:” Cry Havoc, Let slip the dogs of War”. As a result, civil war broke out and Brutus and his co-conspirators were chased away and annihilated. ‘Cry Havoc, Let slip the Dogs of War’! Let not the Dogs of War be unleashed upon our beloved and beautiful country. God forbid!!
5) So, here we are confronted by the PP report on the so-called ABSA “gift” by the SA Reserve Bank.
6) The facts:
6.1) The ANC waged an extremely successful campaign for financial sanctions against the Apartheid regime. By 1985, the regime had to declare a DEBT STANDSTILL. A very critical successful milestone. I personally participated in the campaign. I wish somebody had told me that the burden to deal with the consequences would one day fall on my shoulders. But as a cadre of the Movement, I took on the task.
6.2) Somewhere in 1998, a British bounty hunter came to us to say that there was a debt that the “boers” had to repay the new South Africa. HallelujaH! He produced to us documents that showed that ABSA was liable to pay back about R1.5billion with interest over the years. He in return would receive 10% as a fee for helping us retrieve these “stolen” monies. He came from an organization called CIEX based in London. He was a former agent of the British Secret Service. We were perplexed about why all of a sudden a former British secret service agent wanted to be of assistance to the democratic South Africa when in fact they, the British government had been friends with Apartheid South Africa. We listened and he went on to prescribe to us, Africans, how this would be done. We rejected his offer.
6.3) We agreed though that as soon as I became Governor of the SA Reserve Bank ( because that was in the plan ), I would institute an investigation into all these allegations.
6.4) As soon as I assumed the office of Governor of the SA Reserve Bank, I instituted an independent investigation headed by a Judge. It comprised of a panel of highly qualified people in economics, finance, accounting and political complexities, black and white with international expertise. Their report was also submitted to the PP. This report, it would seem, at reading the media reports, was ignored or might have been complex. I do not want to be judgemental.
6.5) On the basis of that repoart, and its recommendations, the matter was concluded. Yes, I must admit, that a different panel might have come to a different conclusion as these matters normally are the case. But to cast negative judgement on their genuine professional work is both ingenious and unfair. It might be impugning on their professional standing in their professions, society and capabilities.
7) Central banks are very important and sensitive institutions. One of their central tasks as central banks is to protect the stability of the banking and financial system of the economies in which they operate. To fulfill this mandate, central banks have to assess the negative impact of bank failures. This is a huge responsibility which must be approached with extreme care. Political considerations have to be considered, yes, but they must not be above all else. That is why political authorities entrust this responsibility ( central banking ) to an independent institution, the central bank. In a sense, the choice of who is Governor of a central bank is so key. Central Bank Governors are too powerful to be appointed Willy-Nilly! The process of their appointment must be thought through carefully and SERIOUS.
8) When we negotiated our Sovereign Constitution, we entered into a COVENANT about the independence of the SA Reserve Bank. It’s central objective was a long drawn negotiation process. It is unwise to try and change this at the slightest political provocation. It is a very serious matter for our beloved country. Please think carefully about this. I hope the PP has consulted widely about her proposals in this regard. One cannot just take this for granted. This is too fundamental to be treated this easily. The impact of any proposed changes are huge for our country. In any case, one requires a huge majority in Parliament to effect the suggested Constitutional changes which no Party in Parliament currently commands.
9) My suggestion is that all Political Parties must carefully discuss the ramifications of the PP’s recommendation in this regard.
10) As for the BANKORP lender of Last Resort Facility, people must calm down and study all the documentation before expressing any views. Bear in mind the fundamental need for banking and Financial Stability in our economy. I remain available to assist in the conversation if so requested. MeanwhiLe, do not Let Slip the Dogs of War on us. Be calm, dear South Africans. We cannot afford to destabilize our banking and financial stability.
11) I will respond to the PP’s report in due time. I don’t think that the PP’s report was meant to fuel political issues in this year of schizophrenic political tensions. She was just doing her job within the available capabilities. Stay calm. No heroics needed.
20 June 2017
The Royal Horseguards Hotel
PS: Sincere apologies for such a long posting which is controtrary to my view about short postings on Facebook