JOHANNESBURG – South African Finance Minister Malusi Gigaba on Friday accused the country’s anti-corruption agency of overstepping the mark in suggesting changes to the way the central bank works, insisting that monetary policy should remain independent.
A call by South Africa’s public protector for an overhaul of Reserve Bank’s mandate — to focus on growth rather than inflation and the currency — has rattled investors this month, hitting the rand.
It exposed worsening divisions between state institutions just as President Jacob Zuma is embroiled in a net of scandals.
“The public protector does not have the power to direct parliament to amend the constitution,” Gigaba told business leaders at the start of a policy conference of the ruling African National Congress.
“These recommendations should have been directed at the finance ministry. We should all insist on the independence of the South African Reserve Bank.”
Zuma has drawn unprecedented criticism from senior ruling party members in recent weeks. A shock cabinet reshuffle prompted in March ratings agencies to downgrade South Africa to “junk” status and unemployment is at a 14-year high.
The economy has also entered recession, prompting Gigaba to call in his speech for “drastic measures” to kick-start growth.
“Should the main indicators continue to disappoint any further we may have to seek assistance from quarters we have thus far avoided,” Gigaba added, without elaborating.
Asked by Reuters if he was referring to the International Monetary Fund, Gigaba smiled and said “Any”.
The rand extended its losses against the dollar on Friday, trading 0.7 percent lower, while bonds weakened after Gigaba’s comments on the possibility of seeking outside assistance.
Isaac Mashego, senior economist at Nedbank, said with the rate of economic growth not keeping in touch with the government’s expenditure and the budget deficit widening, the government is going to have borrow more.
“This might mean going to multilateral institutions like the IMF. This is the worse case scenario,” he said.
The row over the central banks began earlier this month, when Public Protector Busisiwe Mkhwebane said its current mandate — centred on maintaining currency and price stability — was focused on a “few commercial interests” rather than boosting the economy.
The Reserve Bank immediately rejected the call, saying Mkhwebane’s office had no business in making recommendations about how it is run. It filed a court challenge this week asking for the recommendation to be set aside.
South Africa’s parliament and the ANC also rejected the recommendation, but the country’s largest union backed it.
Credit rating firm S&P Global has warned that its rating for South Africa could be cut deeper into junk territory if the government meddles with the “critical” independence of the country’s central bank.
Critics of President Zuma see the public protector’s comments as an attempt to undermine the bank’s authority as part of a broader attack on state institutions, including the finance ministry, the tax authorities and the public protector’s office.
The president, who was due to deliver a key speech at the conference, rejects such criticism.
Zuma will be replaced as ANC leader at a national conference in December. Deputy President Cyril Ramaphosa and former African Union chair Nkosazana Dlamini-Zuma, the incumbent’s ex-wife, widely viewed as frontrunners.
The six-day conference beginning on Friday should offer clues to who may be in the ascendant.
Gareth Newham, a governance specialist at Pretoria-based think tank Institute for Security Studies said although the conference will focus on policy, the leadership battle to succeed Zuma would be at the heart of the discussions.
“The way policy is spoken about and framed is going to be a proxy for leadership battle,” he said.
“It’s difficult to say who is going in to the conference with more momentum, the forces are quite balanced,” he said referring to Ramaphosa and Dlamini-Zuma.
(Additional reporting Mfuneko Toyana, Ed Stoddard and Nqobile Dludla; Writing by James Macharia Editing by Jeremy Gaunt)