The South African Reserve Bank (Sarb) has blasted Public Protector Busisiwe Mkhwebane, labelling the report in which she prescribed changes to the central bank’s mandate as reckless, questioning her understanding of the constitution.
In court papers filed Friday afternoon, Sarb governor Lesetja Kganyago said Mkhwebane’s remedial action had immediate and damaging consequences for the country.
“She had no regard for the inevitable and serious impact of her report before releasing it. The report was reckless. The Public Protector’s explanation for it is based on a clear lack of understanding of the constitution. It perpetuates a fundamental misunderstanding of the bank’s powers and functions,” he said, citing her answering affidavit in which she explained how she arrived at the remedial action.
In delivering her findings into an apartheid-era bailout granted to Bankorp, which was acquired by Absa in 1992, Mkhwebane prescribed that the Sarb’s primary mandate should be changed such that it promotes balanced and sustainable economic growth while ensuring that the socioeconomic wellbeing of citizens is protected. Her prescribed remedial action caused a sharp selloff in the rand, foreigners also sold R1.3 billion worth of government bonds and rating agencies threatened further downgrades.
The Sarb, parliament and finance minister have brought court challenges against the binding proposal, saying she had gone beyond her mandate. Mkhwebane said, this week, that she would not oppose the court challenge.
Per the Sarb’s court papers, the basis of the Mkhwebane’s remedial action was that its mandate was too narrow. It has argued against this, saying that its mandate is not limited to currency or price stability and that its mandate is conducted in the interest of balanced sustainable economic growth.
It went on to say that the Public Protector’s failed to consider that the constitution vests in the Sarb “all the powers and functions customarily exercised and performed by central banks around the world” and that is does no less than other central banks.
“Her explanation does not bear scrutiny on any reasonable basis. It fails to take into account the section of the constitution that gives the Reserve Bank every one of the powers that other central banks customarily exercise.
“This is a grave and rudimentary error. It is not befitting of a Chapter Nine institution, tasked with upholding the constitution, to investigate a matter, prepare a report, direct remedial action to be taken, all without even having come to grips with what the Constitution provides.
“The only explanation that the Public Protector has offered for her clearly unlawful conduct exposes her own lack of competency,” the Sarb said in a replying affidavit.
It said it is not the Public Protector’s place to “meddle” in the central bank’s mandate, which should be left alone unless elected representatives wish to change it through constitutionally-ordained processes.