Public Protector Busisiwe Mkhwebane’s recommendation that the constitution be amended to change the status and role of the Reserve Bank has been slammed by experts because it could leave the rand “unguarded” on international markets and lead to Zimbabwe-style economic collapse.
As a row erupted yesterday around her comments, the currency dropped 2% in a matter of hours and economists slated her recommendation as “bizarre” and “ridiculous”.
The public protector’s report became one of the biggest trending items on Twitter as many South Africans expressed their outrage, while others supported Mkhwebane.
Chief economist of the Nedbank Group Dennis Dykes said Mkhwebane had showed a complete lack of understanding of how the economy works.
“Clearly everyone does not think of her as independent. You think, what is the sinister motive behind this, and this is a legitimate concern,” said Dykes.
He was commenting after Mkhwebane issued a recommendation to the Reserve Bank which was part of a broader report saying Absa bank should repay R1.125 billion in “misappropriated public funds”.
She recommended that section 224 of the constitution, which deals with the Reserve Bank’s independence, be changed, to in effect remove from its primary objective the need to protect the currency.
This would prevent it from carrying out actions such as using the interest rate to curb inflation. Dykes said a properly administered central bank was about keeping the value of the currency alive and that was one of the foundations of economic growth.
He said the poor would suffer most if the central bank lost its independence and left the currency unguarded, such as in Zimbabwe.
Dawie Roodt, chief economist of the Efficient Group, said: “This is nothing other than a political attack on the monetary system of the country.
“We all know that the public protector is a Zuma crony and she has just proven that with her comments today. I foresee big trouble in future.”
He said if there was any interference with section 224 of the constitution, South Africa would be heading in the same direction as Zimbabwe.
“The rand has lost 99% of its value since 1979. What will happen if the Reserve Bank loses its independence to guard the currency of the country?” Roodt asked.
He said the reality was that the Reserve Bank was doing a relatively good job and that Mkhwebane should keep her hands off it.
Constitutional law expert Marinus Wiechers said: “She can make comments about the bank, she can even investigate the bank because the bank is not above any investigation, but she must give the bank credit for its independence.”
Mkhwebane’s report follows an investigation by the UK-based assets recovery agency CIEX into alleged apartheid-era looting, including the granting of a multibillion-rand bailout to the then Bankorp group, which was bought by Absa in the early 1990s.
Absa spokesperson Phumza Macanda said: “Absa met all its obligations in respect of the loan provided by the SA Reserve Bank by October 1995. It is our firm position that there is no obligation to pay anything to the SA government.”
Mkhwebane said the proposed amendment of the constitution was because “we don’t want a situation where the Reserve Bank is only benefiting, or it only seems to be benefiting, the commercial banks and is neglecting the needs of the South African citizens”.
“It has nothing to do with the issue of taking a certain side or being politically motivated.” – firstname.lastname@example.org