On Monday President Jacob Zuma announced the appointment of Lesetja Kganyago as the next governor of the South African Reserve Bank (Sarb). His appointment is for five years and he succeeds the current governor, Gill Marcus, in the role as from 9 November, 2014.
Marcus said: “The appointment of Mr Kganyago as the 10th Governor of the South African Reserve Bank reflects the depth of talent and skill in the Bank. I congratulate him on his appointment, and have every confidence that he will continue to serve with excellence in his new capacity in the interest of the Sarb, South Africa and all its people.”
For most analysts the appointment didn’t come as a surprise. Nomura, in their regular report, welcomed the announcement: “As expected current deputy governor Lesetja Kganyago has stepped up to the top spot at the Sarb. He has a long history of policy making in South Africa, from most recently overseeing the build-out of the Sarb's financial stability mandate, to previously a lengthy stint as director general of the National Treasury securing that institution’s conservatism and credibility.
“He blends that with a firm sense of independence, analytical mind-set and strong leadership. Yet he has the struggle credentials within the ANC and historically COSATU, in a similar way to Governor Gill Marcus, to be able to connect with the ANC and its policy-making and political structures at the same time as remaining independent – explaining South Africa’s vulnerability and issues, its policy choices and offering counsel as well as bringing a more market and investor perspective into the organisation. In all these ways we think he was the best choice for the job. He is well known and well-liked by the markets, which is a bonus.”
The appointment of Kganyago did not come without any opposition however. “While widely expected, we believe the process of his appointment was not smooth with a number of other serious contenders. Opposition by the SAPC within the tripartite alliance as well as the far left of the ANC were hurdles to overcome, but at the end of the day it appears the ANC judged that none of the external candidates had the right standing or experience in comparison. This again goes to show that, for all the myriad of economic views (including on the Sarb) it has internally, and all its frustrations it has with the independent institution, the ANC understands the need for its credibility and orthodoxy as part of a wider macro policy that gives it the room for more left-wing and interventionist micro policy,” said Nomura.
Will things change under the new Sarb governor?
Nomura believes not. “We expect no major shift in policy under the new Governor. He is likely to be just as open and candid, in our view, as Gill Marcus, and so we expect the communications style including in the MPC statement, and the SARB bluntly calling out South Africa’s issues to remain unaltered. The same is true internally where he is respected by the staff and continuity there is also expected,” added Nomura in its report.
The question now remains who will take over as deputy governor and financial stability mandates at the Sarb. Remember that we saw Gill Marcus as a soft dove and we think it unlikely that whoever is appointed as Deputy Governor will be more dovish than her, so the overall balance of the MPC should be little changed. However, finding someone with the ability to grasp the Financial Stability mandate will not be easy and constructing a short list at this stage will take some thought.