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Rand wobbles as Reserve Bank independence “live wire” touched

Rand wobbles as Reserve Bank independence “live wire” touched

The rand lost 1.5% against the dollar to R13.00 on Monday afternoon as the market reacted negatively to news that the Public Protector wants the Constitution changed to shift focus onto “economic transformation” at the cost of currency security.

Speaking at a findings presentation on Monday morning, Public Protector Busisiwe Mkwebane recommended that section 224.1 of constitution be changed after finding that the South African government was allowed to recover R1.125 billion in “misappropriated public funds” given to Absa bank during the apartheid era.

The recommended change is to the working of the Reserve Bank’s primary objective, from:

“The primary objective of the South African Reserve Bank is to protect the value of the currency in the interest of balanced and sustainable economic growth in the Republic.”

to

“The primary objective of the SARB is to promote balanced and sustainable economic growth in the Republic, while ensuring that the socio-economic well-being of the citizens are protected.”

According to research analyst at Nomura, Peter Attard Montalto, even though he does not expect this change to happen in the near or mid-term, the mere fact that it has been raised at all is seen as a major market negative.

In a brief note following the announcement, Attard Montalto said that the independence of the South African Reserve Bank is one of the few positives for ratings agencies, and as the “last Pandora’s Box”, it was a live wire issue, and just talking about messing with it is bad news for investors.

The analyst also noted that it is unusual for a Public Protector to get this specific about changing the Constitution, or even about economic transformation. It is widely viewed that Mkhwebane is a Zuma loyalist, he said.

Attard Montalto said that the Public Protector’s mandate could be seen as a back-door entry for the “radical economic transformation” narrative to infiltrate the SARB.

“I don’t think this is going to happen in the short- to medium-run. The ANC cannot really muster the support to change the Constitution in Parliament, and would require a two-thirds majority,” he said.

“What the worry is here is that actually it’s much much easier than that. You just need a new Monetary Policy Committee (MPC) mandate, which is done by a letter from the finance minister to the MPC, and this can be done technically at any time.”

“I do not think (finance minister Malusi) Gigaba is going to do that, but this raises the risk and promotes the idea in public debate about how secure this last bastion of an institution is. The SARB is also one of few ratings positives for the ratings agencies. The very fact this issue is being raised and the SARB dragged into the debate is negative,” he said.

The analyst said that SARB leadership is likely to strongly and resolutely defend its independence and existing mandate, and may turn to court action if necessary.


Read: Public Protector wants to change the Constitution to “transform” the Reserve Bank


BusinessTech's Staff Writer is directly plugged into the South African Internet backbone, and spits out press releases and other news as they receive it. They are believed to be cl...
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  • SpiritOfNehanda

    Watch the media and allies go after the public protector… Gigaba will be set aside for later…

  • Viper_ZA

    Yes, we need the Reserve Bank to be renamed & restructured to Zupta® Bank!

    • victory

      Tsotseis must just pay everything they steal

  • victory

    The rand will change direction As soon as Absa pay back the money 😆😀😀😀😀

    • Literally Mario

      That’s… not how exchange rates work.

      • Paul Goodwill

        Did you actually expect an intelligent conversation with ‘victory’?

        • Literally Mario

          You mean to say that using excessive amounts of emojis isn’t a valid counterpoint?

    • John Phoenix

      Drinking again I see…

  • Orlando Da Silva

    The current regime only has 2 years to destroy South Africa. They are backed into a corner and this is their only way out. I assume they are hoping for a war or some other kind of collapse so they can get away with what they have done for the past decade.

    • John Phoenix

      Not hoping, creating, buckle up guys q4 2017, q1 2018 is going to require lots of prayers.

  • Disme

    this bumbling fool does not know what her job is !

  • Cheesy 3.0

    … the thieves are just one step away from looting the Reserve bank as well.

  • Fred Johnson

    ANC and its Cadres are pursuing any means to destabilize the economy. Could it be – that it’s followers by numbers, are powerless to do anything about it as they are suitably kept in the dark/ an uneducated vacuum?

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