Public protector schooled in role of central banks
• Counsel spells out the role of the central bank and the limits to the public protector’s reach
Public Protector Busisiwe Mkhwebane got a dressing down in the high court on Tuesday with counsel for the Reserve Bank, Absa and Parliament schooling her in the constitutional limits to her powers and the role of central banks.
The public protector received a dressing down in the High Court in Pretoria on Tuesday, with counsel for the Reserve Bank, Absa and Parliament schooling her in the constitutional limits to her powers and the role of central banks.
Despite Busisiwe Mkhwebane earlier backing down on her instruction that the Bank’s constitutional mandate be changed, counsel for the three affected parties saw fit to address at length the failure of a Chapter Nine institution to abide by the Constitution.
Absa, the National Assembly and the South African Reserve Bank still had to go to court to ask it to set aside Mkhwebane’s recommendations as is required by the Constitution.
That nobody could fetter Parliament’s discretion in the advance of its duties was a “foundational principle of constitutional law” that escaped Mkhwebane, said advocate Gilbert Marcus, acting for Absa, which joined the Reserve Bank in the matter as a respondent.
Absa has instituted a separate appeal against Mkhwebane’s recommendation that it pay R1.125bn for an apartheid-era bail-out of Bankorp, which Absa later bought.
By instructing Parliament in her report into the Absa/ Bankorp lifeboat to initiate a process that would lead to a change in the Reserve Bank’s constitutional mandate, the public protector had violated Parliament’s legislative power, Marcus said.
While addressing Parliament’s standing committee on finance on Tuesday, Bank governor Lesetja Kganyago discussed the role of the central bank and the need for policy certainty to restore confidence in the economy.
In court papers, Kganyago slammed Mkhwebane’s later justification for her remedial action, namely that the Reserve Bank’s mandate was narrow.
Following the release of the public protector’s report, nonresident investors offloaded R1.3bn in government bonds and ratings agencies threatened further downgrades, he said.
Yet Mkhwebane made no apology for her reckless actions, said advocate David Unterhalter, acting for the Reserve Bank. The public protector had ignored section 225 of the Constitution, which gave the Reserve Bank all the powers and functions customarily exercised by central banks, he said.
These powers were enacted in the South African Reserve Bank Act and went beyond its primary mandate of preserving the value of the currency, Unterhalter said. It was not the case, as Mkhwebane suggested, that the Bank’s mandate, including acting as lender of last resort, did not consider the socioeconomic wellbeing of South Africans.
“In a world of rampant inflation and deep economic instability, it is the poor who suffer the most and have the smallest means to protect themselves against adverse economic effects,” he said.
Judge John Murphy has reserved judgment.