Rating agency Moody’s warned on Wednesday that the erosion of South Africa’s institutional framework and recent calls for changes to the central bank’s currency and price stability mandate risked undermining the country’s credit ratings.
Public Protector Busisiwe Mkhwebane, whose job is to ensure proper conduct in public office, sparked a political row and a plunge in the rand when she proposed changes to the South African Reserve Bank (SARB)’s mandate in June.
The central bank had that recommendation quashed by the High Court. But in fresh court papers on Tuesday it accused Mkhwebane of a “glaring omission” in failing to disclose that she had consulted on the proposal with advisers to President Jacob Zuma.
“Historically, institutional strength was a distinguished feature in the last couple of years but recently that has somehow deteriorated,” said Zuzana Brixiova, a senior analyst for Moody’s at a conference in Johannesburg.
“The issue of the mandate is quite clear in the constitution and the central bank has been performing that mandate very well,” Brixiova said.
Brixiova also said the timing of calls to change the central bank’s mandate and to nationalize the bank were “unusual” as they came ahead of the ruling African National Congress’s (ANC) conference in December to elect new leaders.
“Some of the ANC members and some of the political parties are going beyond the SARB nationalization, they are talking about the nationalization of the entire financial sector, so one also has to ask to what extent is this maybe the first step toward that,” she said.
Policy and political uncertainty has seen business confidence slip to its lowest level in 30 years.
In June, Moody’s cut South Africa’s debt to Baa3, its lowest investment-grade rating, citing a cabinet reshuffle in March that saw widely respected Pravin Gordhan fired as finance minister.
S&P Global Ratings and Fitch each downgraded South Africa’s credit ratings to “junk” in the aftermath of Gordhan’s removal.
Allegations of widespread corruption in the awarding of government contracts worth billions of dollars have also dented investor confidence and widened divisions within the ANC.
The allegations are based on leaked emails between the wealthy Gupta family — who have close ties with Zuma — and their associates. Reuters has not been able to independently verify the allegations in the emails.
Zuma and the Gupta family have denied any wrongdoing.
Reporting by Olivia Kumwenda-Mtambo; Writing by Mfuneko Toyana; Editing by James Macharia and Catherine Evans