Further investigation into Public Protector Mkhwebane’s recent attack on SARB has found that she conspired with the Presidency and the state security to do so.
The South African Reserve Bank (Sarb) stated this in an affidavit it filed on Monday. It stated that Mkhwebanea Busisiwe Mkhwebane conspired with the Presidency and the State Security Agency to attack the central bank and undermine its authority.
According to the affidavit, the public Protector met with the two parties to discuss amending the Reserve Bank’s constitutional mandate just weeks before she released her Bankorp report in June.
Mkhwebane’s proposal for the mandate of the South African Reserve bank to be changed came as a shock to many, including the central bank which saw the proposal as a threat to the institution’s authority and independence.
Her call to scrap the SARB’s inflation targeting framework – which protects the value of the rand was bad news for the state economy as was evident in the rand which got weaker by over 1.5% against the US dollar after she announced her remedial action to change the constitution.
The rand went back to the key R13/dollar level as financial markets digested the threat to one of the main cornerstones of South Africa’s global financial credibility.
Mkhwebane wanted to remove the clause in the Constitution which says that the SARB must maintain price stability to achieve balanced and sustainable economic growth, replacing it with one saying it must promote balanced and sustainable growth “while ensuring that the socio-economic well-being of the citizens are protected”
This overlooks the fact that keeping inflation at low level benefits the poor the most, and would open the door to interest rate cuts which would fan inflation while at best only providing a short-term boost to growth.
Low inflation “helps maintain the value of the money in your pocket”, which was good for all South Africans, but especially the poor and marginalised, who had no power to protect themselves from inflation, the Bank’s governor further explained at that time.
The proposed remedial action was, however, set aside by the high court after she was pressured by SARBS, the Treasury and the Parliament. Judge John Murphy also ordered the Public Protector to pay the costs of the application.