Public protector’s explanation ‘shows lack of understanding’

The explanation offered by Public Protector Busisiwe Mkhwebane for prescribing a change to the constitutional mandate of the Reserve Bank exposed her “lack of competency”, Bank governor Lesetja Kganyago says.

In court papers filed on Friday, Kganyago said the explanation Mkhwebane had provided for the controversial remedial action — proposed in her report on the Absa/Bankorp lifeboat and which she has subsequently withdrawn — was based on a “clear lack of understanding of the Constitution” and perpetuated a “fundamental misunderstanding of the Bank’s powers and functions”.

The Reserve Bank would persist in seeking an order to have Mkhwebane’s remedial action set aside, he said.

Mkhwebane said in an affidavit that sought to explain why she had made the proposal in the first place that she would not oppose such an order.

Kganyago hit out at her explanation. In stating that the Bank’s mandate was narrow and should be broadened, in line with other central banks globally, he said the public protector had demonstrated a lack of understanding of the ambit of the Bank’s powers.

Section 225 of the Constitution gave the Bank “all the powers and functions customarily exercised and performed by central banks”. These powers were enacted in the Reserve Bank Act and were to be exer- cised in the interest of balanced and sustainable economic growth. This section was not mentioned in her report.

“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,” said Kganyago. The report demonstrated “a fundamental lack of understanding of the monetary system and the role of central banks in it”. It damaged the country, eliciting threats of further credit downgrades from ratings agencies, he said.

The Reserve Bank, the Treasury and Parliament launched court applications to oppose Mkhwebane’s recommendation on the Bank’s mandate. The Treasury also applied for her finding that Absa should repay R1.125bn for apartheid-era assistance extended to Bankorp, which Absa later bought, to be set aside.

In court papers, Absa CEO Maria Ramos said Absa had not benefited from the financial assistance provided to Bankorp.