JOHANNESBURG – South Africa's economy, which is in a recession, on Tuesday faced fresh uncertainty over a demand by the state watchdog agency for changes in the way the central bank is run, in escalating fallout from a bank bailout during the apartheid era.
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The South African rand weakened Monday after Public Protector Busisiwe Mkhwebane called for a constitutional amendment stating the South African Reserve Bank's primary role is to promote the socio-economic welfare of South Africans rather than protecting the value of the currency.
The dispute centers on growing frustration among many South Africans that the black majority has not reaped enough economic benefits since the end of white minority rule in 1994, and on the other hand, concerns that state intervention and the rapid transfer of resources will scare off investors and undermine economic growth. Adding to the uncertainty are allegations of corruption linked to President Jacob Zuma and some of his associates.
The South African government announced in early June that the economy is in recession and has acknowledged that its forecast of economic growth of 1.3 percent in 2017 might not be reached. Unemployment is currently 27.7 percent, according to official figures.
At issue in the case involving the central bank is the amount of 1.1 billion South African rand ($86.5 million) that the bank loaned to Bankorp during apartheid. Absa bank, which bought Bankorp in 1992, should reimburse the state, according to Mkhwebane, the public protector. Absa, currently a subsidiary of Barclays Africa, said Mkhwebane's report is flawed and denies it owes any money.
"The remedial action proposed will have a negative impact on the independence of the Reserve Bank," said the central bank, adding that such action falls outside the public protector's powers and is illegal.
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South Africa, which has one of Africa's biggest economies, is already struggling with worries about the slow pace of economic reforms as well as scandals surrounding Zuma, who has faced calls for his resignation, even from within the ruling African National Congress party.
Political uncertainty increased in March when Zuma fired Pravin Gordhan, the widely respected finance minister, in a Cabinet reshuffle. Two agencies, Fitch and Standard & Poor's, responded to Gordhan's dismissal by lowering South Africa's credit rating to below investment grade.
This month, another agency, Moody's, announced downgrades that left South Africa's ratings just above junk status.
Zuma's ties to the Gupta family, Indian immigrant businessmen accused of trying to manipulate top government leaders and state companies for financial gain, have stirred public anger. In another scandal, Zuma was forced to reimburse some state money after the Constitutional Court ruled against him last year in a dispute over millions of dollars spent on his private home.
Another dispute with implications for the economy involves the government's call for a swifter and more robust transfer of control of the mining industry from white interests to members of South Africa's black majority. Critics speculate that the proposed changes could open the door to more corruption and will not necessarily help the South Africans who are supposed to benefit.