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Dispute over apartheid-era bailout escalates in South Africa

JOHANNESBURG (AP) — 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.

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.

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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.

South Africa, which has one of…

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