S&P: More downgrades if Reserve Bank's independence impeded
A row over the South African Reserve Bank has escalated after the Public Protector called for the bank to focus on growth.
JOHANNESBURG - Credit rating firm Standard & Poor's (S&P) Global is warning South Africa's rating could be cut deeper into junk territory if government meddles with the “critical” independence of the country's central bank.
A row over the South African Reserve Bank has escalated after the Public Protector called for the bank to focus on growth more than maintaining currency and price stability.
S&P stripped South Africa of the coveted investment grade rating back in April after the sacking of then finance minister Pravin Gordhan.
Earlier in June, Ratings agency S&P Global re-affirmed the country credit rating at BB+ with a negative outlook - or junk status.
Agency Fitch also reaffirmed its junk status rating, citing tensions within the governing party and slow economic growth.
S&P Global cited similar problems, saying growth remains weak, posing a risk to the pace of fiscal consolidation.
SARB CHALLENGES PUBLIC PROTECTOR'S REPORT
On Monday, Public Protector Busiswe Mkhwebane said that the bank had failed in its duties to protect the public by not ensuring that Absa bank repaid an apartheid-era bailout given to failed bank Bankorp.
But she also said the mandate of the bank's monetary policy should change and that it should no longer focus on protecting the value of the currency.
The Reserve Bank says it believes that her remedial action is unlawful and out of the scope of her powers and that it will challenge the findings in court.
On Tuesday morning, the bank gave its first formal response to the findings of the Public Protector, saying that it's going to court to have her findings reviewed.
The matter relates to funds misappropriated during the apartheid era and given as a lifeboat to Bankorp, which was later purchased by Absa bank.
Mkhwebane found the government failed to recover the funds.
"Whether the South African government and the South African Reserve Bank improperly failed to recover Absa/Bankorp an amount R3.2 billion cited in the CIEX report, the allegation is substantiated. The correct amount of the illegal gift granted to Bankorp or Absa is in an amount of R1.2 billion."
(Edited by Winnie Theletsane)