Here's what Public Protector did to the economy

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The South African Reserve Bank (SARB) on Tuesday laid bare the damage done to the economy by the remedial action advanced by Public Protector Busisiwe Mkhwebane last week in her report into the bailout to Bankorp more than 20 years ago, pointing that Absa and Standard Bank took the most hit among JSE listed banking groups. The central bank, in its urgent application filed with the High Court in Pretoria, detailed how Mkhwebane’s actions had “damaging and immediate consequences for the country in terms of investor confidence.” In an affidavit deposed with the High Court, Reserve Bank governor Lesetja Kganyago said that the rand had depreciated by 2.05 percent from R12.79 against the greenback in the wake of Mkhwebane’s utterances. Kganyago further charged that R1.3 billion worth of South African bonds were sold by non-residents on the day, with the day’s net sales ranking amongst the biggest over the last three months. He said banking shares suffered most as result of Mkhwebane’s recommendations. “They were among the worst performing sectors on the day with sales estimated at R365 million. Absa and Standard Bank accounted for 75 percent of the net sale amount,” Kganyago said.

Mkhwebane caused a stir last week when she, as part of her remedial actions, said that the Reserve Bank had failed in its duties to protect the public by not ensuring that Absa bank repaid an apartheid-era bailout given to Bankorp.

She further said that the central bank’s monetary policy should change and that it should no longer focus on protecting the value of the currency. Rating agency Standard and Poor’s quickly issued a warning that the country’s rating could be cut deeper into junk territory if government meddles with the “critical” independence of the country’s central bank.

The rating agency together with Fitch and Moody’s had earlier in the year stripped the country of the coveted investment grade rating after the sacking of then finance minister Pravin Gordhan.

Kganyago attached a letter from S&P's to the Reserve Bank as part of his affidavit, in which the rating agency sought immediate audience with him to discuss what steps the bourse planned to take on the remedial action proposed by the Public Protectors.

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TIME FRAMES

He said S&P's also wanted clear time frames on what would be done to remedy the situation.

Kganyago pleaded with the court to set the remedial action of the Public Protectors aside so as to safeguard the wellbeing of the economy.

He further charged that the central bank was well placed to deal with financial institutions in distress, like it did in the Bankorp matter.

“The SARB current principles relating to distressed banks and reform in related areas of financial architectures were comparable to the highest international standards.”

In 2014, the central bank had bailed out African Bank with a multi-billion rand cash injection.

Mkhwebane’s report now faces legal challenge on many fronts, with Absa also has indicated its intention to seek judicial relief on the contents of the report.

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