Reserve Bank appoints Lesetja Kganyago as new governor

Posted On Wednesday, 08 October 2014 12:47 Published by
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Lesetja Kganyago has been appointed the new governor of the Reserve Bank.

Lesetja Kganyago Reserve Bank

The appointment is widely seen as pleasing to investors who are keen to see South Africa's monetary policy stay on a predictable track. The rand strengthened to a session high of R11.2590 to the dollar on the appointment of Mr Kganyago, whom investors see as a staunch guardian of the independence of the central bank in Africa's most advanced economy.

Mr Kganyago is set to take up the post on November 9, replacing Gill Marcus who is retiring. Mr Kganyago, the current deputy Reserve Bank governor, thanked Mr Zuma for the confidence shown in him.

"I am truly honoured that the leadership of the country found that I will be suitable to execute this mammoth task. "I will not disappoint ... I don't have to reinvent anything, I just have to carry on from where (Ms Marcus) left," he said.

Ms Marcus thanked the president for appointing her successor from within the bank, indicating that it showed trust in the institution.

Mr Kganyago joined the public service in 1996. He began at the Treasury before his promotion to the position of director-general in 2004. He began his career in accounting at FNB before working for both the Congress of South African Trade Unions and the African National Congress.

In his new role, he is likely to face constant pressure from unions who have in the past accused the Reserve Bank of not doing enough to help overcome the legacy of South Africa's racially divided economic history.

South Africa's jobless rate is 25%, with the black majority making up a large portion, a scourge critics blame on a broken education system which has left them poorly skilled for the labour market.

Analysts surveyed by Reuters had predicted that Mr Kganyago, 48, would get the post ahead of fellow deputy governor Daniel Mminele, who was not seen as having the same political clout or access to senior government officials.

Economists and analysts welcomed the appointment, which was expected by the market.

Capital Economics senior emerging markets economist William Jackson said: "Today's announcement that Lesetja Kganyago will take over as governor of the South African Reserve Bank next month is likely to be warmly received by the financial markets. He has ample experience within the Reserve Bank, currently in a role as deputy governor, and he is likely to be regarded as a safe pair of hands.

"In terms of what this means for policy, the MPC (monetary policy committee) looks set to continue its gradual tightening cycle. In recent media comments, Mr Kganyago came across as quite hawkish, commenting that interest rates needed to be raised to rein in inflation.

"Notably, too, he suggested that looser monetary policy would only have a limited ability to boost growth. It also seems like the government is willing to tolerate higher interest rates, with President Jacob Zuma stating this morning that the rand needed to be protected. All told, we expect a 25-basis-point hike in the repo rate to 6%, at the next MPC meeting on November 20, followed by a further 100 basis points of hikes by the end of next year."

According to Rand Merchant Bank currency analyst John Cairns, "Lesetja Kganyago's appointment as Reserve Bank governor was what the market expected.

"Because it was an internal appointment, it should be good for the markets, with the rand firming after the announcement. He is known for his somewhat hawkish views, but it is too early to speculate on any significant change in monetary policy. The next step to watch is who will replace Kganyago's position in the monetary policy committee."

Macquarie Securities economist Elna Moolman said: "We are very pleased with the choice of the new Reserve Bank governor, which signals continuity in terms of the general approach to monetary policy. Against a generally uncertain economic outlook, and some concern about other elements of SA's economic policies, this was a very reassuring signal from government in terms of this facet of economic policy."

According to South African Institute of Race Relations economist Ian Cruickshanks, "He has got the right pedigree and is known as the regulator contributor to Reserve Bank strategy and policy. He has got to show independence and we hope that he will be vigilant to any change in financial markets."

Last modified on Wednesday, 08 October 2014 13:22

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