The case against Mkhwebane
The SA Reserve Bank’s application to urgently review Public Protector Busisiwe Mkhwebane’s report was filed on Tuesday and presents three different arguments.
First, argues the Reserve Bank, Mkhwebane doesn’t have the power to order changes to the Constitution. Second, even if she did, the change she ordered makes no sense and is irrational because it bears no relationship to her actual investigation. Lastly, the report is procedurally unfair because the interim version the bank had a chance to comment on didn’t mention anything about monetary policy – denying it the chance to meaningfully comment.
The interim version was sent to interested parties late last year and only ordered that the president should consider a new commission of inquiry into the 1985 Bankorp bailout.
An affidavit by Reserve Bank governor Lesetja Kganyago this week detailed the panic that ensued after Mkhwebane released her vastly different final report.
Mkhwebane’s office allegedly dragged its feet in giving the bank a copy of the report on the day of the release as financial analysts almost immediately started calling for clarification.
Lawyers were called the same evening to prepare the bank’s review application. Two days after the report’s release, credit ratings agency S&P Global asked for a meeting.
The mystery around Mkhwebane’s decision to tack a short critique of central banking on the back of her report remains.
“The report makes no reference to a complaint about, or an investigation into, the Reserve Bank’s conduct in pursuing its primary objective,” said Kganyago.
Even the order itself, which is evidently meant to attack inflation targeting, bears no relationship whatsoever to the small amount of monetary policy criticism Mkhwebane did write, he said.
“Not one of the findings relates to the Reserve Bank’s function in protecting the value of the currency.
“The gross overreach by a chapter 9 institution must be stopped in its tracks so that certainty and predictability about the Reserve Bank’s role in our constitutional democracy is affirmed.”
In passing, Kganyago called Mkhwebane’s primary order that Absa should be pursued for R1.15 billion “inexplicable”.
“This is a glaring error, but it is not the focus of this application,” he said.
“The Reserve Bank has been tasked with price stability. The courts have been tasked with the administration of justice and interpretation of the laws. The army has been tasked with protecting the borders of this country.
“Should we say that we should change the constitutional mandate of the army and make the army responsible for the socioeconomic wellbeing of all South Africans?
“The bank’s vision is to lead in serving the economic wellbeing of all South Africans, and we will do this by protecting the buying power that they have. That means protecting the value of the currency.
“You cannot play around with the Constitution. It is a covenant that South Africans have entered into ... As far as we are concerned, this covenant can only be changed by all South Africans and their democratically elected representatives, which is Parliament.
“The authors of our Constitution decided that we must be independent and act without fear, favour or prejudice ... We look beyond political cycles.”
Kganyago cited as an example that often, the AuditorGeneral’s reports were “not politically palatable”.
“Those are exactly the checks and balances that the authors of our Constitution provided, and they must be created. There will always be contestation about policy in society. What’s important about this contestation is that we move from a common basis of facts and evidence.”
Kganyago said there were three key alternative monetary policy frameworks to inflation targeting.
The US Federal Reserve has an inflation target of less than 2%, as well as a measure of targeted unemployment that it tracks.
The second form of monetary policy is aimed at “intermediate targets” or monetary aggregates, as used by the Bank of England and the German Bundesbank, such as credit growth and money supply.
The third type of monetary policy framework is used by Asian countries, including China, whereby a country targets a level for its currency exchange rate, Kganyago said.