New SARB governor has his work cut out

2014-10-07 00:00

NEWLY appointed SA Reserve Bank (SARB) governor Lesetja Kganyago (48) was likely to maintain the bank’s monetary policies, analysts said yesterday.

President Jacob Zuma announced Kganyago’s appointment yesterday.

“I’ve got no doubt that eyes will be on me and I want to say I will not disappoint,” Kganyago said to reporters.

He said he would continue where Gill Marcus had left off.

He was one of two of Marcus’s deputies, alongside Daniel Mminele.

The markets did not appear to react negatively to the announcement, with the JSE All-Share Index rising up a strong 1,8% on the back of stronger U.S. markets, by late yesterday afternoon. The rand had also strengthened after the announcement.

Marcus vacates the position on November 8 and Kganyago assumes duties the next day.

Kganyago said the primary objective of the SARB was to protect the value of the rand in the interest of balanced and sustainable growth.

“Growth can’t be balanced if there are internal and external imbalances,” Kganyago said.

Kganyago has been Deputy Governor of the Bank since May 2011. He has been responsible for areas including research, financial stability, risk management and compliance; and the SARB College.

He also spent time in his early career at the Cosatu and ANC. chief economist Mike Schussler welcomed Kganyago’s appointment, and especially the fact that it was the first appointment of a governor from directly within the bank.

“This will give employees at the Reserve Bank some hope. There is a need for technocrats in this country to get greater exposure … I just wish they would appointment somebody, for example, from within Transnet Rail to head up their rail operations and somebody within SAA to head up the airline, instead of making political appointments,” said Schussler.

Marcus, who turned 65 on August 10, had made a surprise announcement of her plans to quit the post after the last meeting of the Monetary Policy Committee (MPC), which decided to keep the repo rate unchanged at 5,75%.

“We expect the MPC under his leadership will continue to try strike a balance between the challenges of weak domestic growth, above-target but stable inflation, and a tough external climate with US interest rates expected to start rising next year, potentially putting further downward pressure on the currency,” said Izak Odendaal, investment analyst at Old Mutual Wealth. He said this suggested further interest rate increases, but at more gradual pace than in the past.

“In other words, it is a very difficult time to become head of the bank, but Kganyago has the necessary experience, the respect of the market and also the support of a strong team at the SARB,” said Odendaal.

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