Protector backs down on Bank’s mandate
Public Protector Busisiwe Mkhwebane has backed down on her proposal to have the constitutional mandate of the Reserve Bank changed.
She consented to an order sought by the Bank to set aside remedial action as proposed in her Absa/Bankorp report.
“I accept that the powers of the public protector are subject to the Constitution and the law, including the act,” Mkhwebane said in papers filed on Monday.
She would not oppose the Bank’s application.
This comes after her office said last week that she would be opposing the Bank’s application to have her remedial action, directing a change to its man- date, set aside. Mkhwebane had instructed Parliament to institute a process that would result in a change to the Bank’s mandate from one that focused on protecting the value of the currency in the interest of economic growth, to one that focused on the socioeconomic wellbeing of SA’s citizens.
The Bank, the Treasury and Parliament applied to the court to have this set aside, describing it as unconstitutional and beyond her power.
On legal advice from senior counsel, Mkhwebane decided not to oppose the Bank’s review application. “It is not possible that the Constitution would confer a power upon the public protector to undermine other provisions of the Constitution,” she said. Still, in her application, Mkhwebane sought to justify her proposed change to the Bank’s mandate, for which she seems to continue to believe there is good reason.
The Bank’s failure to assess “other socioeconomic objectives”, such as job creation, when it granted an apartheidera bail-out to Bankorp to write off bad debts, was “probably enabled, and could continue to be enabled by the narrowly stated mandate” of the Bank, Mkhwebane said.
“It was for this reason that the public protector considered that a possible review and broadening of the [Bank’s] mandate would provide a long-term effective remedy to possible prejudicial decisions by the [Bank], underpinned by the narrowness of its mandate.”
Bank governor Lesetja Kganyago has said that keeping inflation low and protecting the value of the currency was supportive of growth. The public protector’s “remedial action is, accordingly, irrational”.
“She directs an amendment to the Constitution to improve the socioeconomic conditions of South Africans, but takes away the very powers from the Reserve Bank that are designed to achieve this.”
Low inflation “helps maintain the value of the money in your pocket”, which was good for all South Africans, but especially the poor and marginalised, who had no power to protect themselves from inflation, the Bank’s governor said.
The public protector does not appear to be withdrawing the remedial action concerning Absa, in which she directed the Special Investigating Unit to recover R1.125bn from the bank, in recognition of the bail-out extended to Bankorp, which Absa later bought.
Absa has said the Bank’s intervention was taken into account in determining the R1.23bn it paid to acquire Bankorp. This view was taken by an independent panel of experts, headed by Judge Dennis Davis, appointed by the government in 2000 to look into the matter.
The Treasury has approached the court to have Mkhwebane’s finding in respect of Absa set aside, saying in court papers that Mkhwebane had disregarded the evidence placed before her.