Lesetja Kganyago: From clerk to governor

2014-10-12 15:00

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The new chief of the Reserve Bank has his work cut out for him, but he’s sure his broad shoulders can carry the load

Calls from unions to nationalise the SA Reserve Bank, one of only a few privately owned central banks in the world, are on the increase.

Inflation, which hit 6.4% year on year in August, is outside the bank’s target range of between 3% and 6%. The collapse of microlender African Bank had analysts questioning the efficiency of the central bank’s supervision department.

Economic growth is slowing – the bank’s forecast of 2014 gross domestic product growth is just 1.5%, a downward revision from 1.7%.

These are some of the issues facing incoming Reserve Bank governor Lesetja Kganyago.

But the affable Kganyago jokes during an interview with City Press that his broad shoulders can carry the weight of his new responsibilities.

“I feel I will be up to the challenge,” he says, pointing out that the team outgoing governor Gill Marcus has put in place is excellent and will help steer the ship.

And as he indicated when President Jacob Zuma announced his appointment at the Union Buildings on Monday, he will not tear down the house Marcus built.

The monetary policy committee – which sets interest rates and is composed of the governor, three deputy governors, two advisers and the head of the research department – will stay the same.

“The president must find a deputy governor,” he says. This seat will be empty when he takes on his new role.

However, Kganyago appeared to hint that some changes were afoot during his colourful speech at the Union Buildings when, referring to Finance Minister Nhlanhla Nene, he said: “The Cabinet member responsible for financial matters?...?is here. I have his telephone number. I know where he stays. There will be regular consultations.”

Rand Merchant Bank economist Mamello Matikinca highlighted this in a note to clients.

“It seems there will be closer coordination between fiscal and monetary policy,” Matikinca said.

“While he will face a difficult time ahead – balancing weak growth, relatively high inflation and expectations of policy normalisation by the Federal Reserve – his appointment should, nevertheless, ensure policy continuation.”

Kganyago said he did not feel the bank did not coordinate with the department before, but he was merely citing the Constitution, which requires the central bank to pursue its primary objective of protecting the value of the rand in the interest of growth while having regular consultations with the Cabinet member responsible for national financial matters.

The bank indicated in its July monetary policy statement that it would gradually hike interest rates, but this would depend on economic data.

For now, the bank’s own data show consumer finances are under pressure. Last week, the growth of credit extension to households slowed 3.6% year on year from 4.1% previously.

In July 2014, 28?514 civil judgments for debt amounting to R350.3?million were recorded, according to Stats SA.

If the bank hikes rates as expected, economists expect the situation to worsen.

The major unions are demanding the bank cut rates. The National Union of Metalworkers of SA (Numsa) says interest rates are “killing indebted working class people”, citing statistics from the National Credit Regulator showing that more than half of the country’s 20?million borrowers were credit impaired.

African Bank’s collapse was mainly blamed on a huge number of loans going into arrears as consumers defaulted. But its management is also accused of reckless lending. The microlender was recently placed under curatorship.

The Reserve Bank’s supervision division has come under fire for not exercising adequate oversight over African Bank, but in its defence, Kganyago says no amount of regulation or supervision can make up for good management.

Trade federation Cosatu would like Kganyago to change the bank’s inflation-targeting policy.

Cosatu spokesperson Patrick Craven said: “The new governor must change the policy of seeing inflation as the main threat and using this to justify high interest rates even at a time when many other countries are reducing them to as low as zero.”

Kganyago chairs his first monetary policy meeting next month. He has declined to make predictions on possible hikes or cuts.

Nedbank economists Johannes Khosa and Dennis Dykes expect the bank to hike rates by 25 basis points at the meeting, depending on rand movements. Nomura’s Peter Attard Montalto sees them flat in November, rising 25 basis points in January and hitting 7.50% by the July meeting.

Numsa criticised Kganyago’s appointment, saying workers and the broader society would not be happy having a governor with his track record.

But Kganyago invited the union to discuss its concerns with him. “I did not receive any call from Numsa. I don’t know what the problem is.”

Know your governor


BCom accounting and economics, Unisa MSc development economics, University of London School of Oriental and African Studies


.?Clerk: First National Bank

.?Economics coordinator and accountant: ANC

.?Accountant: Cosatu

.?Assistant manager, investment dealing: Reserve Bank

.?Director, international commercial financing: Treasury

.?Chief director, liability management: Treasury

.?Director-general: Treasury

.?Deputy governor: Reserve Bank

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