South African President Jacob Zuma appointed Lesetja Kganyago as central bank governor on Monday (06/10/2014) to succeed the respected Gill Marcus, pleasing investors who are keen to see monetary policy stay on a predictable track.
The rand strengthened after the appointment of Kganyago, whom investors see as a staunch guardian of the independence of the central bank in Africa’s most advanced economy. Marcus ends her five-year term on Nov. 8.
Kganyago, who has served as deputy governor, said the bank’s primary objective was to protect the value of the rand to support balanced and sustainable economic growth, as well as keeping the financial system stable and inflation under control.
“I have no doubt that eyes will be on me,” Kganyago said, promising to pursue the bank’s mandate “without fear, favour or prejudice“.
“I shall not disappoint,” he told a news conference.
In his new role, Kganyago 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 Kganyago, 48, who has also served as Director General at the finance ministry, 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.
The rand rallied to a session high of 11.2590 on the appointment.
“We view the decision as a positive for South African monetary policy, with Mr Kganyago likely to continue to pursue the bank’s mandate of price stability while at the same time remaining sensitive to the challenges the economy continues to face,” said BNP Paribas Cadiz Securities analyst Jeffrey Schultz.
The Reserve Bank has increased interest rates by 75 basis points this year, tempering its concerns about rising inflation with the need to ease pressure on the struggling economy.
At an investment summit last week, Kganyago, who has long been seen as a policy hawk, said the central bank should keep its focus on taming inflation, comments that suggested rates would be more likely to rise than stay unchanged.
Kganyago will chair the bank’s last policy meeting of the year on Nov. 18-20.
His appointment to the bank’s top post leaves a vacant seat for one of its three deputies, who would automatically join the seven-member monetary policy committee (MPC). – Reuters