Suggestions that the South African central bank’s inflation-targeting mandate should be changed are “unlawful”, according to the bank, which defended its independence after being criticised by an anti-corruption watchdog.
The public protector’s office said on Monday that the country’s constitution should be changed to make the South African Reserve Bank promote “balanced and sustainable economic growth” instead of targeting inflation.
The recommendation prompted investors to dump the rand and South African government bonds.
However, in a statement on Tuesday morning, the Sarb said the public protector’s recommendation “falls outside her powers and is unlawful”.
The central bank said the recommendation, if enacted, would “have a negative impact on the independence of the Reserve Bank”, stripping it of “its key competency to protect the value of the currency and the well understood role that central banks play in securing price stability”.
Busisiwe Mkhwebane, the public protector, said the central bank should be made to protect the “socio-economic well-being of the citizens”, but the Sarb hit back in its statement this morning, saying it already acts “in the interests of the welfare of all South Africans”.
Sarb governor Lesetja Kganyago has repeatedly warned about the risks political instability pose to its efforts to control inflation and support the economy, but worries about the bank’s independence have risen since Mr Zuma fired respected finance minister Pravin Gordhan in late March.
The bank said it will begin “urgent review proceedings” to have Ms Mkwebane’s recommendations set aside. It added that it will address other concerns with her report and “factual inaccuracies therein” at a later date.
Ms Mkhwebane was appointed by president Jacob Zuma last year after her predecessor implicated the president in a report on “state capture” – alleged widespread corruption and cronyism in state institutions.
Her appointment prompted worries about the watchdog’s independence, but Ms Mkhwebane insisted yesterday “I am captured by the Constitution, I am not captured by any person, hence I am here to serve South Africans and not serve any political party or any person”.
The rand, which weakened 1.5 per cent against the dollar on Monday, was roughly flat for the day at publication time.