Call to change South African central bank mandate dubbed 'very serious risk'

Mkhwebane made her proposal at a Pretoria news conference on Monday where she delivered her findings on an apartheid-era bailout of Barclays Africa Group.

FILE: Public Protector Busisiwe Mkhwebane. Picture: Kgothatso Mogale/EWN

JOHANNESBURG - One of South Africa's largest financial groups weighed into the row over central bank independence on Wednesday, saying proposals to change how it is run were a "very serious risk" to the country.

Barclays Africa joined a growing list of groups and high-profile individuals attacking calls by Public Protector Busisiwe Mkhwebane to change the central bank's mandate of maintaining currency and price stability to focus on economic growth.

The banking group's intervention comes as it itself is subject of a critical report by Mkhwebane's agency, South Africa's official constitution watchdog.

It said in an unusually blunt statement on the central bank issue: "(Mkhwebane's) recommended amendments pose a very serious risk to the financial system and they cannot be allowed to stand."

South Africa's economy has sunk into recession and its credit rating downgraded to junk by two of the top three credit rating agencies. The country is also gripped by questions over President Jacob Zuma's leadership a time when unemployment is at a 14-year high of 27.7%.

Mkhwebane made her proposal in a statement to a Pretoria news conference on Monday where she delivered her findings on an apartheid-era bailout of Barclays Africa Group. The lender has denied any wrongdoing.

Finance Minister Malusi Gigaba, who is currently in London, told Reuters on Tuesday he was still studying Mkhwebane's central bank report and would make a decision on whether to back the bank's request for a court review of the recommendation.

The bank says the public protector has no jurisdiction in the area of central banking.

But Gigaba also stressed that the independence of the central bank must be protected at all times.

"We should be very cautious about making proposals that are going to leave the economy - and the institutions we have to manage our economy - weaker," he said.


Mkhwebane's proposal threatens to further stain South Africa's image as an investor-friendly emerging market, coming less than a week after Mining Minister Mosebenzi Zwane spooked investors by raising the minimum threshold for black ownership of mining companies to 30% from 26%.

The independence row has also highlighted divisions within the tripartite alliance of the ruling African National Congress (ANC), the country's biggest union, the Congress of South African Trade Unions (Cosatu), and the South African Communist Party (SACP).

Both the ANC and the communist party are opposed to constitutional changes aimed at altering the role of the central bank while Cosatu backed calls for amendments.

Former finance minister Trevor Manuel, an instrumental figure in smoothing South Africa's return to the global financial system after Nelson Mandela's election in 1994, also attacked Mkhwebane's suggestion.

"This report extends so far beyond the remit of the public protector that it portends significant danger," Manuel told Reuters. "What is her locus standi (legal standing) to propose amendments to the constitution? That is so way above her pay grade."

In her findings during the probe into Barclays Africa, Mkhwebane, also said the apartheid government breached the constitution by supplying Bankorp, which was acquired by Absa, now Barclays Africa, in 1992, with a series of bailouts from 1985 to 1995. She said Barclays Africa must pay R1.1 billion.

Barclays Africa said it would challenge her report in court.

"This is due to numerous misrepresentations and factual inaccuracies which form the basis of the Public Protector's findings, and what we submit are the irrational and unreasonable legal conclusions in the report," the bank said.