Public protector in hot water

Late in June 2017 the public protector found itself in an interesting situation. Reserve Bank Governor Lesetja Kganyago filed an urgent application to the North Gauteng High Court to set aside the remedial action proposed by the Public Protector. Dealing with matters concerning the Bankorp bailout during the apartheid era, as well as the indicated change of the mandate of the bank by the protector.

Public Protector, Busisiwe Mkhwebane, ordered the Portfolio Committee on Justice and Correctional Services begin proceedings in order to change the Constitution “in pursuit of improving socio-economic conditions of the citizens of the republic”. She also recommended they make adjustments to a specific paragraph in the Constitution that would see the removal of references to “protect the value of the currency”. This in essence takes away the responsibility the government or its bodies would face if their actions hurt the standing of the Rand – in turn taking away the primary function of the Reserve Bank, to protect the value of the currency.

As the body responsible for protecting the value of the currency in the interest of balanced and sustainable economic growth, central banks are recognised worldwide as a key function within an economy. Central to economic stability and ratification.

The SARB, not to be outdone, came out strongly against the public protector. Implementing plans to obtain a court review, they aim to set aside the action as it is not only unlawful, but also does not fall within Mkhwebane’s powers as the Public Protector.

Mkhwebane does not have power to amend the Constitution, however in this case she is not only suggesting it, but instructing parliament to follow through on it – changing the constitution in order to strip the SARB of its primary functions. Without a Reserve Bank instilled with the power to protect currency, we could find ourselves in even more hot water. Not only damaging to our economy, but also a huge mark against us in the eyes of potential investors, this will decrease confidence in our economy but too large a margin.

From the moment the action was announced it has had a serious effect on the economy. The longer it remains in place, it holds the risk of causing further damage to the rand value, ratings downgrades and capital outflows. The Reserve Bank as a body is given an autonomous role in protecting the currency and its potential. This is central to sustainable growth and development, job creation, poverty alleviation and reducing inequality.