JOHANNESBURG - 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. It’s
another in a series of wrangles that could keep the institution in the public
eye for something else than monetary policy this year.
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 percent of the seats, to change the South African Reserve
Bank Act.
“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.”
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‘Dismissive’ Approach’
Mkhwebane said on Thursday while she did meet with the
Presidency before issuing her report, they didn’t discuss the central bank’s
mandate. While she didn’t explain why the meeting wasn’t disclosed, her office
plans to file an answering affidavit on Oct. 23.
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 ($85 million). The High Court set aside Mkhwebane’s instruction on
the Reserve Bank mandate, criticizing her “dismissive and procedurally unfair
approach.”
The central bank’s affidavit this week forms part of a
separate application to scrap the order for Absa to pay back the money. While
proposing a state-owned central bank isn’t unusual, “the problem was timing,”
Moody’s Investors Service lead analyst for South
Africa, Zuzana Brixiova, told reporters in Johannesburg this week.
“The two issues came around at the same time and in the run-up to elections of
the ANC leadership and more broadly the elections in 2019.”
ANC Leader
Zuma’s term as leader of the ANC ends in December and the
new party head who will be elected will likely succeed him as national
president in 2019.
Moody’s is the only major ratings company that still
assesses South Africa’s foreign-currency debt as investment grade, after Fitch
Ratings Ltd. and S&P Global Ratings downgraded the nation to junk in April
after Zuma fired Pravin Gordhan as finance minister.
Governor Lesetja Kganyago and his three deputies were all
appointed by Zuma for set terms and the Reserve Bank Act makes no provision for
the removal of a governor. Deputy Governor Daniel Mminele’s second five-year
term ends in June 2019 and he is the only one of the central bank’s four top
officials for who Zuma could potentially name a replacement, depending on when
the 2019 election is held. Kganyago’s term ends in November of that year.
“There is a worry about what happens from mid-2019 and
onward when the deputy governors and governor are likely replaced under new ANC
leadership,” Peter Attard Montalto, an analyst at Nomura International
Plc. in London,
said. “While the courts can stand up for the independence written in the law,
ultimately in the long term, it will come down to politics.”