The South African Reserve Bank has warned that the remedial action put forward by the public protector in her investigation into the Bankorp bailout during the apartheid era will cost the country billions.
This follows Public Protector Busisiwe Mkwebane’s recommendations to parliament instituting remedial action into her finding over failed Bankorp Bank R1.225 billion bailout reports.
Subsequently, the effects were felt immediately with the rand dropping by 2% against the dollar within hours of the report release.
“From the moment it was announced it had a serious and detrimental effect on the economy and for as long as it remains in place, it holds the risk of causing further rand depreciation, further rating downgrades and further capital outflows,” Reserve Bank Governor Lesetja Kganyago explained.
According to SA breaking news, South Africa has already been expelled from two JP Morgan investment-grade only bond indices – in April and May following standard and poor’s (S&P) downgrade of the currency to junk status.
The country faces expulsion from the Barclays Group index and Citbank World Government Bond Index should other rating agencies follow S&P’s lead and enforce further downgrades. This would lead to a loss of R39 billion worth of investment in government bonds in the former index, and R100 billion in the latter, SARB is warning.
The bank also pointed out that Mkhwebane committed an error when recommending remedial action against it as it was not the subject of the investigation.
The Reserve Bank on Tuesday lodged an urgent application at the North Gauteng High Court in Pretoria, calling on the court for urgent intervention.
The bank has asked for the courts to hear the matter urgently, on August 1, as the public protector wants a response to the remedial action by August 18.