Pub­lic Pro­tec­tor speech ‘bizarre’

Mkhwe­bane’s sug­ges­tions are un­law­ful

The Star Early Edition - - NEWS - Ka­belo Khu­malo

AS THE CRIT­I­CISM of Pub­lic Pro­tec­tor Bu­sisiwe Mkhwe­bane’s pro­posal to change the man­date of the SA Re­serve Bank mounted, rat­ings agency S&P’s Global Rat­ings yes­ter­day weighed in on the mat­ter, warn­ing against the med­dling with the central bank’s in­de­pen­dence.

Mkhwe­bane on Mon­day opened a can of worms when she said she would ap­proach Par­lia­ment in or­der to change the man­date of the South African Re­serve Bank (Sarb), bring­ing to an end the in­sti­tu­tion’s in­fla­tion tar­get­ing role.

Her com­ments saw the rand plum­met more than 2 per­cent.

S&P’s down­graded South Africa to sub-in­vest­ment grade on Mon­day, fol­low­ing a mas­sive cab­i­net reshuf­fle, said yes­ter­day that it was “crit­i­cal” that the op­er­a­tional in­de­pen­dence of the central bank re­mained.

“We would con­sider it crit­i­cal that the op­er­a­tional in­de­pen­dence of the Re­serve Bank re­mains un­touched lest we would see weak­en­ing pol­icy flex­i­bil­ity in mone­tary af­fairs.

“De­pend­ing on the sever­ity of the changes (to the central bank’s in­de­pen­dence), a rat­ing action could in­deed be one con­se­quence,” S&P’s sov­er­eign an­a­lyst, Moritz Krae­mer, said.

The Re­serve Bank and the Bank­ing As­so­ci­a­tion of South Africa (Basa), have also come out strongly against the Pub­lic Pro­tec­tor’s stance, with Basa say­ing the mooted re­me­dial ac­tions were “alarm­ing”.

In­de­pen­dence

Basa manag­ing di­rec­tor, Cas Coova­dia, said: “The role and in­de­pen­dence of the (Re­serve Bank) is crit­i­cal in main­tain­ing what lit­tle cer­tainty re­mains in our al­ready frag­ile econ­omy.

“The bank­ing sec­tor has re­peat­edly em­pha­sised this point, and once again ob­jects in the strong­est pos­si­ble terms to any in­ter­fer­ence in the op­er­a­tions and func­tion of the Sarb.”

The Re­serve Bank said yes­ter­day that Mkhwe­bane’s sug­gested con­sti­tu­tional changes would strip the bank of its key com­pe­tency to pro­tect the value of the cur­rency and se­cur­ing price sta­bil­ity.

“The re­me­dial action pro­posed will have a neg­a­tive im­pact on the in­de­pen­dence of the Re­serve Bank,” it said.

It said Mkhwe­bane’s pro­posed re­me­dial action pre­scribed fell out­side her pow­ers and was un­law­ful.

The Bank said it in­tended to bring ur­gent re­view pro­ceed­ings to have the re­me­dial action set aside.

“The Re­serve Bank acts in terms of its con­sti­tu­tional man­date in the in­ter­ests of the wel­fare of all South Africans,” the bank said.

Ar­mand Greyling, a law and pol­icy an­a­lyst at AfriBusi­ness, said: “What the Pub­lic Pro­tec­tor is aim­ing to achieve with her bizarre rec­om­men­da­tion is to com­pletely strip the Re­serve Bank of its cru­cial in­de­pen­dence.

“This will make the bank sub­servient to gov­ern­ment, ef­fec­tively at­tempt­ing to na­tion­alise the bank­ing sec­tor and pro­mote gov­ern­men­tal goals, rather than sus­tain­able eco­nomic growth to the ben­e­fit of all South Africans.”

How­ever, trade union fed­er­a­tion Cosatu yes­ter­day came out in sup­port of Mkhwe­bane.

PHOTO: BLOOMBERG

Absa shares and those of all the other South African banks took a beat­ing af­ter Pub­lic Pro­tec­tor Bu­sisiwe Mkhwe­bane’s speech on Mon­day.

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