South Africa central bank proceeds with action against ombudsman

Bloomberg

South Africa’s central bank will persist in seeking a court order to set aside an instruction from the nation’s anti-graft ombudsman that its mandate must be changed, even after Public Protector Busisiwe Mkhwebane said she won’t oppose the regulator’s application.
In a report last month, Mkhwebane instructed the legislature to start a process to amend the nation’s constitution to make the Reserve Bank focus on the “socioeconomic well-being of the citizens” rather than inflation. Her comments caused the rand to slide as the change was seen by investors as a threat to the lender’s independence.
The bank then started a court application to review and set aside her instruction, with Mkhwebane on July 11 saying she won’t oppose it.
“It is not good enough for the Public Protector to now concede the merits and say that she consents to her remedial action being set aside when her explanation for her conduct, instead of offering a retraction and apology, perpetuates the damage,” Governor Lesetja Kganyago said in papers filed at the High Court in Pretoria.
Non-resident investors sold about 1.3 billion rand ($100 million) of South African government bonds and ratings companies threatened further downgrades after Mkhwebane’s actions, he said.
“It is clear from her answering affidavit that she had no regard to the inevitable and serious impact of her report before releasing it,” Kganyago said. Her “clearly
unlawful conduct exposes her own lack of competency,” he said. The central bank’s application will be heard in court on Aug. 1.
The Reserve Bank is “not taking anything for granted,” Gina Schoeman, an economist at Citigroup Global Markets in Johannesburg, said by phone. “They want this to be put in the rubbish bin and never to be spoken about again.”
Mkhwebane was appointed by lawmakers to replace Thuli Madonsela as Public Protector in September last year. Only the largest opposition party, the Democratic Alliance, voted against Mkhwebane’s appointment, citing her lack of experience
and allegations that she worked for the
government’s intelligence service.
The Reserve Bank has a mandate to target inflation at 3 percent to 6 percent. The Monetary Policy Committee has kept the benchmark repurchase rate unchanged at 7 percent since last March after raising it by 200 basis points from the start of 2014. The MPC will announce its decision on borrowing costs on July 20.
“The mandate of the Reserve Bank should be left alone, unless the representatives of the people, through constitutionally ordained processes, wish to change it,” Kganyago said. “It is not the place of the Public Protector to meddle in these affairs.”
Mkhwebane’s report followed an investigation into an apartheid-era bailout by the regulator of Bankorp, which Barclays Africa Group Ltd.’s Absa bought in 1992 and instructed the lender to repay 1.125 billion rand. Absa and the National Treasury have also asked the court to review Mkhwebane’s report and Parliament has filed an affidavit supporting the Reserve Bank’s application.