Johannesburg - The South African Reserve Bank has warned that the call by Public Protector Busisiwe Mkhwebane to amend the constitution could undermine its role to ensure financial and economic stability.
It said her report had harmed the economy and the rand, with a possibility of further credit-rating downgrades.
In an application in the Pretoria High Court on Tuesday, Reserve Bank governor Lesetja Kganyago urged the court to stop Mkhwebane in her tracks before further harm was done to the economy.
Kganyago said ratings agencies had already warned of more downgrades if the recommendation was implemented.
He described the report by Mkhwebane “as gross overreach” and warned that the public protector did not have powers to direct Parliament to amend the constitution.
“The public protector’s remedial action must be set aside.
“From the moment it was announced, it has had a serious and detrimental effect on the economy, and for as long as it remains in place, it holds the risk of causing further rand depreciation, further ratings downgrades and significant capital outflows,” said Kganyago.
“This 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 democracy is affirmed,” he stated.
Kganyago also argued that the role of the SARB was price stability and protection of the currency.
“The public protector wants to change all this.
“Her remedial action, if implemented, would take the core function of central banks away from the Reserve Bank,” he said.
“Changing the primary objective of the Reserve Bank in this way threatens to undermine the critical contribution of the Reserve Bank to the stability of our financial system, which is central to sustainable growth, job creation, the reduction of inequality and poverty alleviation,” said Kganyago.
Mkhwebane made the recommendation after an investigation into the CIEX Report, which had found that the bank had given Absa an illegal bailout of more than a billion rand during the apartheid era.
Kganyago urged the court to set aside the findings and recommendation by Mkhwebane to change the mandate of the SARB.
He said what she wanted would make it difficult to achieve economic growth and maintain stability in the market.
Mkhwebane’s findings had wreaked havoc in the market, with the rand losing 2% of its value moments after she made the announcement.
Kganyago also accused Mkhwebane of not giving the SARB an opportunity to respond to her report. She was supposed to give them the report five days before she released it, but she did not do it, Kganyago said.
Absa took the same position that it was not given the report in advance so it could respond to Mkhwebane’s allegations.