Reserve Bank also ‘came under attack’ from state capture, says Kganyago

South African Reserve Bank (Sarb) governor Lesetja Kganyago says the central bank also ‘came under attack’ from state capture, like many other state institutions.

But that it fiercely defended its independence.

Speaking as a guest during an interactive online discussion on Wednesday, hosted by independent policy think tank the Centre for Development and Enterprise (CDE), Kganyago conceded that several state institutions were “weakened, while some were totally gutted” by state capture.

He did not specifically name the affected institutions in responding to a question on why independence matters for key institutions like the Sarb, which was posed by webinar host and CDE executive director Ann Bernstein.

Kganyago said that the independence of institutions backed by the Constitution is very important, but that the “quality of institutions matter”.

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He pointed out that people who lead such “institutions of the Constitution” – such as the governor of the central bank – are “put in positions of trust”. This meant that it was “not just a case of protecting the institution” but “stepping up and defending” its mandate.

“The easiest way to weaken an institution is to install pliable individuals to lead it,” he said.

Kganyago stressed that institutions like the Sarb need to maintain their independence and be free from political interference, as these “institutions have a contract with society… as spelt out in the Constitution”.

“We need independent institutions with a clear mandate, but that are also accountable to the public,” he added, noting that Sarb’s role is to deliver price stability.

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Asked by Bernstein whether state capture is over, Kganyago replied candidly: “I don’t know if it’s over… But, when it comes your way, you know it.”

He noted that for the Sarb, it was challenged by state capture when it faced pressure on the issue of its mandate around awarding banking licences, with threats to move this mandate back to the Department of Finance (National Treasury) a few years ago.

“The way in which we faced state capture was the attempted move to strip the Reserve Bank to award banking licences… But, when we saw state capture, we just shut our gates [to it],” he said.

“The attacks on the bank came in a sophisticated manner… When we saw the systematic attacks on the institution, we knew we had to defend its independence, even in court,” Kganyago added.

Asked about his view on commercial banks deciding to close the bank accounts of the Guptas, he said that this was an issue between the respective banks and their clients.

However, he pointed out that banks are also bound by the country’s laws around money laundering, as South Africa is also a signatory to international anti-money laundering conventions.

By Suren Naidoo

This article first appeared on Moneyweb and was republished with permission. Read the original article here.