South Africa adds central bank row to economic and political troubles

South Africa adds central bank row to economic and political troubles

South Africa adds central bank row to economic and political troubles

PRETORIA/JOHANNESBURG, June 19 (Reuters) - South Africa's rand fell more than 1.5 percent on Monday after the Public Protector, an anti-graft agency, recommended constitutional changes to make the central bank promote economic growth rather than currency and price stability.

The South African Reserve Bank says it will bring urgent review proceedings to have the Public Protector's order to change the bank's mandate in the Constitution be set aside.

At issue is 1.1 billion South African rand (USD 86.5 million) that the central bank loaned to Bankorp during white minority rule, which ended in 1994.

Some of Mkhwebane remedial action include that the Special Investigation Unit re-open the case and recover the funds which she said were given unlawfully to Absa.

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Reserve bank governor Lesetja Kganyago came out strongly against such changes, defending the current primary objective saying that by keeping inflation low and protecting South Africa's currency, it is already supporting inclusive growth and the well-being of citizens.

In an interview with 702 Talk Radio Busisiwe Mkhwebane also said that the central bank's mandate was focused on a "few commercial interests".

"The remedial action proposed will have a negative impact on the independence of the Reserve Bank".

The proposal comes at a "sensitive time and is highly dangerous", Peter Attard Montalto, an economist at Nomura International, said by e-mail.

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The bank has received the Public Protector's report, Barclays Africa said in a separate email. It then provided Absa with a further R2.25 billion in bailouts from 1992 to 1995.

"This is quite unusual that a Public Protector has been so specific on changing the constitution or indeed be so radical on transformation", he said.

She found that by sending the money to Bankorp, the SARB failed to comply with the SA Reserve Bank Act, among other findings.

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