The South African Reserve Bank (SARB) has torn into Public Protector Busisiwe Mkhwebane, calling her attempt to rewrite the Constitution “ill-informed and reckless”, and a threat to the poor.

Mkhwebane “threatens to undermine the critical contribution that the Reserve Bank makes to the stability of our financial system, which is central to sustainable growth and development, job creation, the reduction of inequality and poverty alleviation,” Reserve Bank governor Lesetja Kganyago says in papers filed on Monday.

The Bank has asked the high court in Pretoria to in early August hear, before a full bench, its arguments on why Mkhwebane’s recent report must be set aside. In that report, which dealt with an Apartheid-era bailout to a bank later bought by Absa, Mkhwebane instructed Parliament to remove the Reserve Bank’s constitutional mandate to keep inflation in check.

Mkhwebane has since claimed that she was merely making a suggestion that Parliament start a process that could, theoretically, amend the Constitution—but this is not how the bank sees it.
Mkhwebane, says Kganyago, plainly “instructs Parliament to pass a Constitutional amendment that has been selected by an unelected functionary.”

That instruction simply can not be allowed to stand, Kganyago says.

“From the moment it was announced, it has had a serious and detrimental effect on the economy and for as long as it remains in place, it holds the risk of causing further Rand deprecation, further ratings downgrades and significant capital outflows.

“This gross overreach by a Chapter Nine institution must be stopped in its tracks so that certainty and predictability about the Reserve Bank’s role in our constitutional democracy is affirmed.”

Although the Reserve Bank is typically conservative and careful with its words, Kganyago’s affidavit pulls no punches. It accuses Mkhwebane of acting irrationally, unfairly, well beyond her powers, and in breach of the doctrine of separation of powers.

By trying to do away with inflation targeting, Mkhwebane wants to destroy a tool that benefits all South Africans, Kganyago says, “particularly the disadvantaged and the poor”.

He also holds that Mkhwebane’s attempt to make the Reserve Bank responsible for economic development and transformation to be sorely misguided.

“This is not the role of central banks,” Kganyago says. “It is the role of the elected representatives of the people. And yet, by an act akin to legislative fiat, the Public Protector intends to transform the Reserve Bank into a socio-economic well-being organisation.”