July 10, 2017 / 3:56 PM / a month ago

UPDATE 1-S.Africa's graft watchdog won't challenge central bank in court over mandate

* Mkhwebane recommended change in central bank mandate

* Central bank filed court challenge against mandate change

* Finance minister, parliament also oppose proposal (Adds Mkhwebane)

JOHANNESBURG, July 10 (Reuters) - South Africa's Public Protector will not oppose a court challenge against her binding proposal calling for a change to the mandate of the central bank, her office said on Monday.

Busisiwe Mkhwebane, whose job is to ensure proper conduct in public office, recommended last month that the South African Reserve Bank's (SARB) mandate of maintaining price and currency stability be changed to focus on economic growth.

That set off a political row that has hit the rand and government bonds and prompted court challenges from SARB Governor Lesetja Kganyago, Finance Minister Malusi Gigaba and Speaker of Parliament Baleka Mbete. They argue that Mkhwebane had gone beyond the scope of her mandate.

The Public Protector's spokeswoman Cleopatra Mosana said on Thursday that Mkhwebane had filed a notice opposing the challenges to her recommendation. Mkhwebane said she was empowered by the constitution to intervene in such affairs.

On Monday, however, her offices said Mkhwebane would no longer be putting up a defence of her recommendation in court.

"Having considered the legal advice from the Senior Counsel, which advice she accepted, the Public Protector, Advocate Busisiwe Mkhwebane has decided not to oppose SARB’s review application," Mkhwebane's office said in a statement.

The rand was unmoved by the news.

Analysts say it is unclear what prompted Mkhwebane's recommendation. It will now be up to the courts to decide whether her mandate extends to the central bank. The SARB has requested for a hearing of the case in August.

The ruling African National Congress has stated that it is opposed to altering the mandate the central bank.

But its ally Cosatu, the country's biggest union, has backed calls for changes saying the bank is not acting in the interests of South Africa's poor majority.

Mkhwebane made the proposal to change the bank's mandate when she delivered her findings on an apartheid-era bailout of a bank that was subsequently bought by Absa, now a unit of Barclays Africa Group. (Reporting by Olivia Kumwenda-Mtambo and Tiisetso Motsoeneng; Writing by James Macharia; Editing by Catherine Evans)

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