South African watchdog comments on central bank rattle rand

Mon Jun 19, 2017 5:36pm GMT
 

By Dinky Mkhize

PRETORIA (Reuters) - South Africa's rand fell more than 1.5 percent on Monday after the Public Protector, an anti-graft agency, recommended constitutional changes to make the central bank promote economic growth rather than currency and price stability.

By 1613 GMT, the rand was trading 1.29 percent weaker to the dollar at 12.9700, having hit 13.0075 in response to the comments from Public Protector Busisiwe Mkhwebane.

Government bonds also weakened, with the yield for the benchmark instrument due in 2026 rising as much as 11 basis points to 8.595 percent.

Mkhwebane made the proposal in a statement to a Pretoria news conference where she delivered her findings on an apartheid-era bailout of Barclay's Africa Group.

In her recommendations, Mkhwebane said the constitution should be changed to make promoting balanced and sustainable economic growth the primary objective of the South African Reserve Bank (SARB).

The central bank said late on Monday that it was studying the Public Protector's report and would announce its response to the findings and remedial actions.

Specifically, Mkhwebane said the phrase "to protect the value of the currency" should be removed from the constitution. That phrase has been central to South African monetary policy since the end of white-minority rule in 1994.

Mkhwebane was delivering her findings against Barclays Africa, and it was unclear why deviated into monetary policy. Nomura emerging markets economist Peter Attard Montalto said the tangent was touching "Pandora's Box".   Continued...

South African Rand coins are seen in this photo illustration taken September 9, 2015. REUTERS/Mike Hutchings/Illustration/File Photo
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