South Africa Central Bank Says Anti-Graft Head Met Zuma Team

(Bloomberg) -- South Africa’s central bank accused the Public Protector of bias and being part of a campaign to undermine its independence as documents showed the graft ombudsman held a secret meeting with President Jacob Zuma’s lawyers before proposing changes to its mandate.

The investigation by Public Protector Busisiwe Mkhwebane of an apartheid-era bailout turned “to an attack on the Reserve Bank” and not about whether Barclays Africa Group Ltd.’s Absa should repay the money, central bank Advocate Johann de Jager said in court papers filed on Monday. She also failed to disclose a meeting with the presidency’s lawyers held before her findings were released, he said.

Mkhwebane instructed lawmakers in a June 19 report to change the constitution to make the bank focus on the “socioeconomic well-being of the citizens” rather than inflation. This followed her probe into CIEX consultancy’s report on the central bank’s bailout of Bankorp, which Absa bought in 1992. She told Absa to repay 1.125 billion rand ($87 million). The High Court set aside her instruction to change the central bank’s mandate last month.

“This attack is evidence of bias or at least a reasonable apprehension of bias on the part of the Public Protector,” De Jager said. “It also shows that her remedial action had an ulterior purpose.”

The 96-year-old Reserve Bank has become a scapegoat for the economic woes of Africa’s most-industrialized economy, which had its second recession in almost a decade this year. Many investors took Mkhwebane’s findings as a threat to its independence, causing the rand to weaken.

Incomplete Records

The Public Protector’s record of proceedings of her probe are “woefully incomplete,” and didn’t disclose the June 7 meeting with the lawyers in Zuma’s office to discuss her report, which is “a glaring omission,” the advocate said.

A document in the record about a meeting with “SSA,” which De Jager takes to be a reference to the State Security Agency, contains a note in a section dealing with the Reserve Bank with the question “how are they vulnerable,” he said.

“It is unclear on what possible basis the vulnerability of the Reserve Bank was relevant to the Public Protector’s investigation into the CIEX report,” he said. “The fact that this topic was even discussed with the State Security Agency indicates that the Public Protector’s investigation was aimed at undermining the Reserve Bank.”

The affidavit forms part of the central bank’s request to the court that it sets aside Mkhwebane’s instruction for the regulator to recover the Bankorp bailout funds from Absa. It brought the application in August.

Nothing stops the Public Protector from meeting anyone, including the president or State Security Agency, eNCA reported on its website, citing Mkhwebane.

The Democratic Alliance, the biggest opposition party, said in a statement it will ask lawmakers to start proceedings for the removal of Mkhwebane because the meeting with Zuma’s lawyers “casts serious doubts as to her independence.”

--With assistance from Amogelang Mbatha

To contact the reporter on this story: Sam Mkokeli in Johannesburg at mmkokeli@bloomberg.net.

To contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Ana Monteiro, Gordon Bell