Reserve Bank charges Public Protector, Presidency colluded

The Reserve Bank alleges that Public Protector Busisiwe Mkhwebane colluded with the Presidency to attack the central bank two weeks before she released her controversial report calling for the amendment of the Bank’s constitutional mandate and the recovery of an apartheid-era bail-out to Bankorp.

The Bank’s general counsel‚ Johannes de Jager‚ filed a supplementary affidavit on Monday with new grounds for reviewing certain aspects of the report‚ arising from previously confidential notes of the public protector’s meeting with the Presidency’s legal advisers.

Dated June 7 and attached to De Jager’s affidavit‚ the notes show Mkhwebane discussed reopening the Special Investigating Unit’s (SIU’s) prior probe into the Bankorp issue — which found that the funds could not be recovered without risks to the financial system.

“The Public Protector was not frank about disclosing the fact of this meeting in the report‚” said De Jager. “This is a glaring omission.”

According to the notes of the meeting with the Presidency‚ Mkhwebane wanted the SIU to amend its proclamation to include the Ciex report drafted by former British spy and bounty hunter Michael Oatley.

The notes also show that Mkhwebane discussed potential remedial actions for what she said was the Bank’s failure to recover R1.25bn in misappropriated funds from Bankorp — including changing the Constitution and the formation of a state bank — with former Reserve Bank director Stephen Mitford Goodson.

De Jager said in his affidavit it was unclear whether these were separate meetings‚ and that if it was one meeting‚ it was highly irregular.

According to the notes‚ Goodson told Mkhwebane that he had given the IFP “the legislation” on a state bank‚ which was supposed to be tabled in Parliament.

“Local media will rubbish it‚” Mkhwebane noted. “Pressure will be external rather than internal via the media.”

Still‚ Mkhwebane said the benefits of a state bank would be jobs‚ and more money in circulation — which would go hand in hand with the Freedom Charter.

“The state will never borrow again.”

In a note dated May 3‚ Mkhwebane detailed a meeting with the “SSA”‚ which De Jager thought was a reference to the State Security Agency.

In it‚ the public protector made three points relating to the Reserve Bank: that it be of “interest to nations”‚ asked “how are they vulnerable”‚ and questioned its “institutional mechanism”.

“The note appears to indicate that one of the matters discussed at the meeting was the vulnerability of the Reserve Bank‚” said De Jager. “It is unclear on what possible basis the vulnerability (and vulnerability to whom) of the Reserve Bank was relevant to the public protector’s investigation into the Ciex report.”

“The fact that this topic was even discussed with the State Security Agency indicates that the public protector’s investigation was aimed at undermining the Reserve Bank‚” Bloomberg quoted De Jager as saying.

The remedial action on changing the Reserve Bank’s constitutional mandate from protecting the value of the currency to ensuring the socioeconomic wellbeing of all citizens wound its way into Mkhwebane’s report on the Bankorp bail-out.

This remedial action was reviewed and set aside by the court.

The formation of a state bank was placed in the report as a “conclusion” instead of a remedial action.

“Leading authors advocating and promoting the ideology of state banks and nationalisation of monetary currency believe that the notion of the lender of last resort’s status that is inherent to central banks internationally would cease to exist if governments take sole power in creating money through the establishment of state banks‚” Mkhwebane said in her report on Bankorp.