by James Tweedie

SOUTH AFRICA’S Reserve Bank (SARB) resisted calls for reform yesterday after the state watchdog demanded legal action over its apartheid-era loans.

Public Protector Busisiwe Mkhwebane said on Monday that commercial bank Absa should repay a 1.125 billion rand (£68 million) bailout of Bankorp by the SARB in the final years of the apartheid regime.

Absa, one of South Africa’s “big four” finance houses and itself a subsidiary of British banking giant Barclays, bought Bankorp in 1992.

Ms Mkhwebane also called for changes to the constitution to make the SARB’s mission to promote balanced and sustainable economic growth, adding that the phrase “to protect the value of the currency” should be removed.

The SARB responded yesterday: “The remedial action proposed will have a negative impact on the independence of the Reserve Bank.

“The Reserve Bank has consulted its legal team and has been advised that the remedial action prescribed by the Public Protector falls outside her powers and is unlawful.”

The allegations against the SARB and Absa were contained in a report by investigative firm Ciex. Ms Mkhwebane’s predecessor Thuli Madonsela sat on that report for years, while producing her “state capture” report exposing President Jacob Zuma’s shadowy ties to the billionaire Gupta business family.

Ciex alleged as early as 1997 that the country’s financial system was institutionally corrupt and serving the Afrikaner Broederbond, the apartheid network of patronage.

Union federation Cosatu backed Ms Mkhwebane yesterday, adding that it had long supported the ANC government’s position that “state capture investigations should be broadened.” On Monday Cosatu president Sdumo Dlamini said that the probe “should also extend to the financial sector.

“There are no holy cows: Absa is guilty of a crime and it has all along been pretending to be holier than thou,” he said.

And the South African Communist Party, which has previously warned that the broadening of the investigation would dilute it, letting the Guptas and Mr Zuma off the hook, welcomed the public protector’s report on Monday, saying that it vindicated its own calls for the past 17 years.

The rand fell on international markets on Monday following Ms Mkhwebane’s finding, as did Barclays Africa shares and government bonds.

US ratings agencies downgraded South Africa to “junk” credit status earlier this year following Mr Zuma’s sacking of finance minister Pravin Gordhan, who had a reputation as escaping the mire of corruption surrounding Mr Zuma.