South Africa central bank in attack mode

Monetary policy committee will likely cut the benchmark lending rate to 6.5 per cent on September 21

The South African Reserve Bank’s fight against its detractors escalated this week, and now even has President Jacob Zuma in its sights.

The central bank in court papers accused Public Protector Busisiwe Mkhwebane of bias and being part of a campaign to undermine its independence after documents showed the anti-graft ombudsman held a secret meeting with Zuma’s lawyers before proposing changes to its mandate.

Its mandate isn’t the only front on which the central bank has come under fire in the past three months. After Mkhwebane instructed lawmakers in June to change the constitution to make the bank focus on the “socioeconomic well-being of the citizens” rather than inflation, the ruling African National Congress proposed the next month that the bank, which has private shareholders, should be state-owned. If the proposal is adopted at the party’s elective conference in December, ANC lawmakers should ask parliament, where it holds 62 per cent of the seats, to change the South African Reserve Bank Act.

The bank’s monetary policy committee will probably cut the benchmark lending rate to 6.5 per cent on September 21, according to the median estimate of 20 economists surveyed by Bloomberg. This would be the second consecutive 25 basis-point drop. “The Reserve Bank wants to bat from the front foot,” George Herman, chief investment officer at Citadel Investment Services in Cape Town, said by phone, referring to an attacking stance in cricket. “I think the bank understands that it is in the sights of those who are looking to take power away from it, and they are being proactive.” The graft ombudsman’s recommendation followed a probe into CIEX consultancy’s report on the Reserve Bank’s bailout of Bankorp, which Barclays Africa Group Ltd’s Absa bought in 1992. She told Absa to repay 1.125 billion rand (Dh312 million). The High Court set aside Mkhwebane’s instruction on the Reserve Bank mandate, flaying her “dismissive, procedurally unfair approach.”