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Reserve Bank Governor Lesetja Kganyago has filed an urgent application to the North Gauteng High Court to set aside the remedial action proposed by the Public Protector concerning the Bankorp bailout during the apartheid era.
Public Protector Busisiwe Mkhwebane previously recommended the mandate of the bank be changed.
She recommended that the Portfolio Committee on Justice and Correctional Services initiate a process to change the Constitution “in pursuit of improving socioeconomic conditions of the citizens of the republic”. She also recommended they amend a paragraph in the Constitution that removes reference to “protect the value of the currency”, Fin24 reported.
But the Reserve Bank came out strongly against this, indicating plans to seek a court review to set aside these recommendations as they were unlawful and did not fall within Mkhwebane's powers.
The affidavit emphasises that Mkhwebane does not have power to amend the Constitution. “In the impugned remedial action, the Public Protector instructs Parliament to amend the Constitution to strip the Reserve Bank of its primary function – to protect the value of the currency.
“The Public Protector has no power to amend the Constitution, let alone instruct Parliament to do so,” said Kganyago.
Kganyago went on to explain that her actions had damaging consequences for the country, especially in terms of investor confidence.
“From the moment it was announced it had a serious and detrimental effect on the economy and for as long as it remains in place, it holds the risk of causing additional rand depreciation, downgrades and outflows.”
Protecting the value of the currency in the interest of “balanced and sustainable” economic growth is a key function of central banks, recognised worldwide, Kganyago explained. “There was a general consensus that low and stable inflation provides the foundation for high, sustainable real growth, and this is a goal central banks can be reasonably expected to achieve.”
The central bank is given an autonomous role to protect the currency, because the long term price stability may come into conflict with a government’s shorter-term goals, he said.
The remedial action suggested by the Public Protector will take away this core function of the Reserve Bank. This may threaten the “critical contribution” the bank makes to the stability of the financial system.
This is central to sustainable growth and development, job creation, poverty alleviation and reducing inequality.
The Reserve Bank called for the prompt action by the courts, as uncertainty would continue to pervade markets, impacting the economy.
Read the full affidavit below:
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