Nene unruffled as Marcus’s exit hits rand

Published Sep 22, 2014

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Johannesburg - The rand visited a fresh seven-month low on Friday in a market still coming to terms with the news that well-regarded Reserve Bank governor Gill Marcus will leave her post in November.

Traders said that uncertainty over who would succeed Marcus would keep investors nervous about future monetary policy.

Marcus is only the second Reserve Bank governor to serve just a single term, according to Jannie Rossouw, a former secretary of the bank. Gerhard Rissik, who was in charge from 1962 to 1967, was the first.

The rand hit a session low of R11.115 to the dollar on Friday. By 5pm it had pared its losses somewhat and was bid at R11.084, still 4.38c softer than at the same time on Thursday.

Finance Minister Nhlanhla Nene said in an interview at the weekend that the rand’s fall was not “out of proportion”.

Nene, who is attending the meeting of Group of 20 finance ministers and central bankers in Cairns, Australia, said: “I think it [the rand] is going to stay there for a while, you know around that level R10, R11, R12, and I think we’ve priced it in most of our projections.”

On Marcus’s imminent departure, Nene said it was not a surprise to the government.

“I would imagine the president will expedite the process” to name a new governor.

President Jacob Zuma and Nene would probably discuss the appointment “quite soon”, although there was “plenty of time” to make the decision.

Marcus, who turned 65 on August 10, made the surprise announcement in response to a question after a meeting of the monetary policy committee (MPC) on Thursday. Marcus indicated Zuma might pick a successor from within the bank.

But Nene said there were also people with appropriate abilities outside the central bank who could do the job.

“There is no obvious successor, other than Daniel Mminele and Lesetja Kganyago,” Azar Jammine, the chief economist at Econometrix, said. “I don’t think initially there will be too much concern about the continuation of monetary policy.”

Kganyago, 48, joined the bank as a deputy governor in May 2011 after being director-general of the National Treasury for more than seven years.

Educated at the University of London and London School of Economics, he also spent time in his early career in Cosatu and the ANC.

At the Reserve Bank, he has overseen the banking supervision, financial stability and exchange-control regulation departments, as well as its risk and compliance units.

Mminele, 49, who was schooled in Germany and at the London Guildhall University, worked at African Merchant Bank as deputy head of special projects and at Commerzbank in Johannesburg before joining the Reserve Bank in 1999. He was named a deputy governor in 2009 and heads the bank’s financial markets and international banking departments.

Both serve on the Reserve Bank’s seven-member MPC.

Gina Schoeman, an economist at Citigroup, said Kganyago might have an advantage because he had worked closely with Nene before.

“He is well respected and he did a very good job while he was at the National Treasury,” she said. “Many people know him and he’s seen as prudently hawkish. So he’s not willing to kill the economy with too many rate hikes, but he is willing to retain credibility by being tough on inflation.”

Marcus, a former deputy finance minister and chairwoman of Absa, took office in 2009 after the global financial crisis hit, which dragged the local economy into its first recession in 17 years and pushed up inflation.

Stability has been a hallmark of Marcus’s tenure. During the time that she has led the MPC, the benchmark rate has been adjusted just six times compared with 17 in the previous five years.

“She has done well during a very tough time,” Craig Parker, an economic analyst at Frost & Sullivan in Cape Town, said.

“She was dealt quite a difficult hand and I think she has made the best of it.

“I do think the decision for her to step down comes maybe as a bit of a shock.”

Goolam Ballim, the chief economist at Standard Bank, said: “The market is likely to take the governor’s decision in its stride. It’s sad to see her leave, but there is a depth of talent in the MPC and the likes of Mminele or Kganyago may succeed her, or even someone less apparent.” - Reuters and Bloomberg

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