Rand tanks as Public Protector opens Pandora's Box on currency laws

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The ANC can not really muster the support to change the Constitution in parliament and would require a two thirds majority.

The Public Protector had recommended that Parliament amend the Constitution regarding the powers of the Reserve Bank.

In her findings, Mkhwebane found that the Reserve Bank and the government failed to recover R1.125 billion from Bankorp for irregular monetary gifts granted to it during apartheid.

There were also fears the Public Protector's comments could contribute to policy uncertainty, with the Sarb cited by ratings agencies as a beacon of strength.

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The proposal comes at a "sensitive time and is highly unsafe", Peter Attard Montalto, an economist at Nomura International, said by email.

"While it seems unlikely that any change will happen immediately, the fact that this matter is being raised now is negative for South Africa at a time when the country is economically vulnerable". Inflation targeting, he said, is necessary in the current economic climate and in order for it to be achieved, the bank's central mandate must remain constant.

"The Reserve Bank has been advised to bring urgent review proceedings to have the remedial action set aside".

The Constitution now states: "The primary object of the South African Reserve Bank is to protect the value of the currency in the interest of balanced and sustainable economic growth in the Republic".

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"We will continue to honour our constitutional mandate and the trust placed in us by the South African society", he said.

The amount of 1.125 billion rand represents the interest accrued from the central bank's loans, Mkhwebane said.

In December Zuma, who has denied wrongdoing and faced down calls for his resignation over a series of scandals that have plagued his administration, asked the High Court to set the report aside.

Investors were already expressing concern about the central bank row.

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