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  What this economic genius does not realise is that "balanced and sustainable economic growth" depends upon fighting inflation, AND a belief in the future by investors, entrepreneurs and skilled indivi...  

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Rand falls to R13/$ after Public Protector’s call to change constitution

‘The Sarb should promote balanced and sustainable economic growth, rather than target inflation’ – Mkhwebane.

South Africa’s rand fell more than 1.5% on Monday after the Public Protector, an anti-graft agency, recommended constitutional changes to make the central bank promote economic growth rather than currency and price stability.

By 00:30 Tuesday morning, the rand was trading 1.44% weaker to the dollar at 12.99, having hit 13.0525 in response to the comments from Public Protector Busisiwe Mkhwebane.

Government bonds also weakened, with the yield for the benchmark instrument due in 2026 rising as much as 11 basis points to 8.595%.

Mkhwebane made the proposal in a statement to a Pretoria news conference where she delivered her findings on an apartheid-era bailout of Barclays Africa Group.

In her recommendations, Mkhwebane said the constitution should be changed to make promoting balanced and sustainable economic growth the primary objective of the South African Reserve Bank (SARB).

The central bank said that it was studying the Public Protector’s report and would announce its response to the findings and remedial actions.

But SARB Governor Lesetja Kganyago told a business gathering late on Monday, without making specific reference to Mkhwebane’s recommendations, that keeping inflation low and protecting the value of the currency was supportive of economic growth.

“The ratings agencies have been clear that the effectiveness of the central bank is one of the strongest pillars supporting this economy – a claim that speaks to both our price and financial stability mandates,” Kganyago said.

“We will continue to honour our constitutional mandate and the trust placed in us by the South African society.”

Specifically, Mkhwebane said the phrase “to protect the value of the currency” should be removed from the constitution. That phrase has been central to South African monetary policy since the end of white-minority rule in 1994.

Mkhwebane was delivering her findings against Barclays Africa, and it was unclear why deviated into monetary policy. Nomura emerging markets economist Peter Attard Montalto said the tangent was touching “Pandora’s Box”.

“This is quite unusual that a Public Protector has been so specific on changing the constitution or indeed be so radical on transformation,” he said.

Nevertheless, he said, any changes to the central bank’s mandate were unlikely to happen in the short to medium run given the legal resistance the SARB was likely to mount.

“I see the SARB leadership strongly and resolutely defending their independence and existing mandate including via court action if necessary,” he said.

Economists Nic Borain and Jeff Schultz at BNP Paribas South Africa said in a note that the Public Protector had placed the future of the central bank’s autonomy into question.

“We also think that it is possible that the public protector has overstepped her powers in instructing Parliament to change the constitution and, therefore, her report is likely to face judicial review,” Borain and Schultz said.

SHARES FALL

In her findings against Barclays, which trades under the name of Absa, Mkhwebane said the bank had unduly benefited from apartheid-era bailouts and must repay R1.125 billion ($87 million).

She also said the government and the Reserve Bank had failed in their role.

Mkhwebane said her investigation had found that the apartheid government breached the constitution by supplying Bankorp, which was acquired by Absa in 1992, with a series of bailouts from 1985 to 1995.

Absa denied any wrongdoing. It said it was studying Mkhwebane’s report and would consider its legal options.

At the same event, Mkhwebane said she will oppose a bid by President Jacob Zuma to have set aside a report on claims of influence-peddling by him and his government.

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Wouter Fourie

Wouter Fourie

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   15 comments

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So they want to lower interest rates so the government can go on a spending spree so they can win the election?

Good lord, where does the incompetence and corruption end?

What business does she have making recommendations to change the constitutions in any capacity, especially with respect to the reserve bank?

Surely she has her hands full with the dozens of high profile corruption charges floating around.

It’s not just one bad apple, the whole basket is rotten and needs to be thrown out.

I can’t remember the last time we went through a week without some massive controversy chasing away investment into the country. Either its mass corruption, stalling renewable energy projects,cabinet reshuffles, a ridiculous mining charter or the PP deciding to affect the currency.

I almost wonder if there isn’t some currency play going on at the moment whereby someone is benefiting from manipulating the situation. SA fundamentals are the only thing keeping afloat a the moment, not sure how long that can last.

Oh, so now the public protector is now an economist?

So Team ZUPTA has cranked our national debt up from zero to 1 trillion ZAR over their 2 terms, and now they are going to force us into default and blame the people who they borrowed the money from in the first place.

The tragedy of all of this is its almost like the (Z)ANC is playing to the NAT’s worst-case scenario. All that we are now waiting on is white genocide.

These reckless comments are to be expected from inept and corrupt ANC cadres. According to the ANC constitution the responsibility and accountability is “shared by the collective”. This implies that any individual in the ANC bears 1 out of 20 million of the responsibility. It is clear that the ANC leaders and cadres act with impunity, they are irresponsible and opportunistic for they are never held accountable for their actions.

The ANC constitution is responsible for the implosion of the economy and the voters will only realize this when the supermarkets run empty.

Again…why is Mkhwabane commenting on this matter? Its not like there are no corrupt practices matters that she can’t focus on. Focus, is the operative word here, and second stay in your lane, Ms.

I think, she has a much better chance to get an infection in her two front teeth, from a meat eating bacteria , than succeeding with this call!

This is just statements made by the ANC peons, to distract the populace, keeping us busy with these remarks and notions so she can again delay on her real duties as PP to investigate “state capture” and ANC corruption. She is a planted, cadre straight from the start.

She is clearly a puppet and part of the Zuma clan. Zero credibility and also captured.

What this economic genius does not realise is that “balanced and sustainable economic growth” depends upon fighting inflation, AND a belief in the future by investors, entrepreneurs and skilled individuals (the potential brain drain).

It is a pity that her comments (they cannot really be called findings) regarding the Reserve Bank, like a Zille tweet, have the signal drowned by the noise. Being a JZ783 appointment, tinkering with banks (where puppet JZ783’s string-pullers have “issues”) and not dealing with the Guptering of the country [a.k.a. state capture, looting or SaxonwoldShebeening) have placed her remarks in an unfortunate context. Hence the suspicious reception.

While the ZANC loves prating about the separation of Parliament, judiciary, admin, church, and so on WHEN IT SUITS THEM, the overlapping roles of the Reserve Bank should be questioned. It is simply a bad idea to have the sane entities actors and regulators (demonstrated by Eskom, HRC, Parliament, etc). Indeed the entire point of a Public Protector is “independent oversight”. While the RB does provide some oversight over the commercial banking sector “who guards the guards”?

We do need more checks and balances; the reception of the PP’s fantasies indicate that, no matter how well meant, there suspicion is that she is bent [pun intended] on undermining them.

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