South Africa

Reserve Bank and Parliament trump Public Protector as court sets aside remedial action to change Constitution

By Marianne Merten 15 August 2017

The North Gauteng High Court in Pretoria on Tuesday set aside Public Protector Busisiwe Mkhwebane’s report that sought to change the constitutional mandate of the South African Reserve Bank (SARB). And the Public Protector has been ordered to pay costs in a scathing judgment that raised questions over why the scope of the initial investigation was extended without explanation, whose comments were actually included in the final report, and what appeared to be the Public Protector’s “somewhat unrepentant alignment with one side of the public debate”. By MARIANNE MERTEN.

When Public Protector Busisiwe Mkhwebane publicly released her first report on the ABSA bailout of Bankorp on 19 June, it stirred a hornet’s nest. Her remedial action included an instruction to Parliament’s justice committee chair to change Section 224 of the Constitution that outlines the SARB mandate to also include “promoting balanced and sustainable economic growth and ensuring that the socio-economic well-being of the citizens are protected” while requiring regular consultations between Parliament, rather as is currently the case with the Finance Minister, and SARB “to achieve meaningful socio-economic transformation”. 

The exchange rate weakened on this news as it was widely regarded as an attempt to tamper with the SARB’s independence, one key plus for South Africa amid the recent ratings downgrades. “The Rand depreciated by 2.05% from R12.79 to R13.05 against the US Dollar. R1.3-billion worth of South African government bonds were sold by non-resident investors. Although some of these sales have subsequently been reversed, they were still significant. The day’s sales… rank amongst the biggest over the last three months,” was how SARB Governor Lesetja Kganyago put it in his affidavit filed as part of the court review of the Public Protector’s report.

The SARB was joined in that court review by ABSA, National Assembly Speaker Baleka Mbete, and finally the National Treasury. This court action against the Public Protector’s report came amid sharpening contestation over the Reserve Bank. Last month’s ANC national policy conference recommended that, while its independence should be guaranteed, the SARB should be nationalised. It has around 650 private shareholders, who by law have no say on day-to-day operations, policy direction or on South Africa’s foreign reserves. The ANC national policy conference recommendation did not address the monies required for such a buyout of shareholders whose dividend income is capped at R200,000 per annum.

Amid calls for her resignation and stinging public criticism of incompetence, Mkhwebane went into overdrive to defend her report, with her staff at one stage blaming a typo. Ultimately, the Public Protector decided not to defend the court review and conceded to the court that the remedial action was unlawful and, as Judge J Murphy put it in his judgment, that “only Parliament has the power to amend the Constitution and she has no power to dictate to Parliament”.

That “begrudging concession of unconstitutionality”, as the judge described it, was no defence to the charges of illegality and irrationality. “It is disconcerting that she seems impervious to criticism, or otherwise disinclined to address it.”

As custodian of legality and due process in public administration, the Public Protector had relished charges of hypocrisy and incompetence. “A dismissive and procedurally unfair approach by the Public Protector to important matters placed before her by prominent role players in the affairs of state will tarnish her reputation and damage the legitimacy of her office,” said the judgment.

Kganyago’s court papers, among other things, pointed out the report’s inconsistencies and lack of incorporation of the SARB’s responses to the initial draft report. Mbete’s affidavit highlighted the irrationality of the Public Protector’s linking the possible failure to recoup all monies from the Bancorp deal to constitutional change. “No one can rationally suggest that the failure by the South African Government and the Reserve Bank to recover money from a bank is appropriately remedied by stripping the bank (SARB) of its primary object of protecting the currency,” Mbete said in her court papers.

The judge in his ruling said it was “disingenuous” to pass off her remedial action as a mere recommendation. In March 2016 the Constitutional Court in its judgment on the Nkandla saga ruled that remedial actions are binding, unless challenged in court through a review.

“She (Mkhwebane) would do well to reflect more deeply on her conduct of this investigation and the criticism of her by the Governor of the Reserve Bank and the Speaker of Parliament,” the judge said. DM

Photo: Public Protector Busisiwe Mkhwebane listens during a briefing at Parliament in Cape Town, South Africa October 19, 2016. REUTERS/Mike Hutchings

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