Report on central bank 'reckless': Kganyago

The public protector’s recent report on banking in South Africa had “a serious detrimental effect on the economy”, said Reserve Bank governor Lesetja Kganyago.

Busisiwe Mkhwebane's instruction to parliament to start a process to change the nation's constitution to make the central bank focus on the "socioeconomic well-being of the citizens" rather than inflation must be "stopped in its tracks", added Kganyago.

He said her intervention had already weakened the rand, caused bond outflows and knocked banking stocks. S&P had warned that South Africa's ratings could be downgraded even further.

Kganyago's comments came in a Reserve Bank application to the Pretoria High Court to reverse Mkhwebane's instruction.

His description of the public protector's action as "ill-informed and reckless" was echoed by most economists.

The public protector's investigation was supposed to be into a bail-out by the regulator of Bankorp, which Barclays Africa Group's Absa bought in 1992, and was "not concerned with the Reserve Bank's constitutionally entrenched powers", Kganyago said.

Her action went beyond the ambit of the probe and also breached the separation of powers, he said.

The findings ignored submissions from the central bank that all the money from the bail-out had been repaid. At no stage was the Reserve Bank informed that its mandate would be under consideration, he added.

"The remedial action ... is taken with the object of promoting socioeconomic development but removes one of the key tools the Reserve Bank uses to achieve this," Kganyago said.

"Low inflation helps maintain the value of the money in your pocket. This is good for all South Africans, but especially the poor."