Picture: GETTY IMAGES/SIMPHIWE NKWALI
Picture: GETTY IMAGES/SIMPHIWE NKWALI

Reserve Bank governor Lesetja Kganyago has hit out at public protector Busisiwe Mkhwebane, saying in court papers that her report displayed a “fundamental lack of understanding of the monetary system and the role of central banks”.

The Reserve Bank would persist in seeking an order in terms of an earlier notice of motion, to have Mkhwebane’s remedial action concerning a change to the Bank’s constitutional mandate, contained in her Absa/Bankorp report, reviewed and set aside, Kganyago said.

This was notwithstanding the fact that Mkhwebane had backtracked earlier this week on the proposed change, saying in an answering affidavit that she would consent to such an order.

“Despite the public protector now conceding the merits of the case, she has filed an affidavit in which she seeks to explain “how and for what reasons” she arrived at the remedial action,” Kganyago said. This explanation, instead of offering an apology, simply perpetuated the damage.

Her explanation was based on a clear lack of understanding of the Constitution and perpetuated a “fundamental misunderstanding of the Bank’s powers and functions”, he said.

In stating that the Bank’s mandate was narrow and should be broadened in line with other central banks globally, the public protector ignored section 225 of the Constitution, which gave the Bank “all the powers and functions customarily exercised and performed by central banks”, said Kganyago.

These powers and functions were enacted in the South African Reserve Bank Act, he said. “The Reserve Bank’s mandate is not limited to “currency or price stability”, but … it must conduct its mandate in the interest of balanced and sustainable economic growth in the Republic of SA.”

Mkhwebane’s explanation demonstrated that she failed to take account of the detailed submissions that the Bank had provided to her, Kganyago said.

“The only explanation that the public protector has offered for her clearly unlawful conduct exposes her own lack of competency.”

The report was reckless and had immediate and damaging consequences for the country, including the sale of R1.3bn worth of South African government bonds by nonresident investors, and threats of further downgrades by ratings agencies, he said.

On Thursday, Absa filed papers saying it would oppose Mkhwebane’s remedial action seeking R1.125bn from the bank for an apartheid-era bailout of Bankorp, which Absa later bought. Absa CEO, Maria Ramos said in papers that Mkhwebane’s recommendation rested on “material errors of fact”.

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