Marcus Named South African Reserve Bank Governor
Gill Marcus, chairwoman of Barclays Plc’s Absa Group Ltd., will become South Africa’s central bank governor, succeeding Tito Mboweni, who has been criticized by labor unions for not cutting interest rates faster.
Marcus, 59, a former deputy governor of the South African Reserve Bank, will take over the post Nov. 9 after Mboweni indicated that he wanted to leave the position, South Africa’s President Jacob Zuma told reporters in Pretoria today.
The departure of Mboweni, 50, may raise concerns about the influence exerted by labor unions, who had called for him to be replaced. The Congress of South African Trade Unions, the federation that backed Zuma’s bid to become leader of the ANC, wants the government’s inflation- targeting policy to be reviewed.
“The appointment of Gill Marcus, who is not exactly unknown to the markets, will go some way in reassuring investors of the continuity of policy,” said Razia Khan, head of Africa economic research at Standard Chartered Plc, in London. “But there are question marks. The left has wanted Tito Mboweni to go. That they exert some influence can’t be dismissed.”
Mboweni, who was appointed as governor in August 1999, has been criticized by unions and businesses over monetary policy and for failing to act to weaken the rand as the economy entered its first recession in 17 years.
No Tears
“We didn’t have the best of relationships with Mboweni. Its obvious we won’t shed any tears,” Zwelinzima Vavi, the general secretary of Cosatu, said in a telephone interview. “We are obviously great enemies of inflation targeting, which can only be implemented through high interest rates. We think there will be a change in monetary policy.”
Cosatu hopes that Marcus’s appointment “will mark a change of policy by the Reserve Bank to one more geared to economic growth rather than a rigid obsession with inflation targeting,” federation spokesman Patrick Craven said in an interview.
The South African Communist Party, which together with Cosatu, is part of a political alliance with the ANC, welcomed the appointment.
“The SACP hopes this appointment will bring about a breath of fresh air,” the party said in an e-mailed statement. “The SACP is concerned about interest rates being used as a blunt instrument to control inflation and their impact on the value of the currency, investment, employment and growth.”
Target Range
Under Mboweni, the central bank adopted a target range for inflation of 3 percent to 6 percent. He raised the benchmark interest rate 10 times to 12 percent between June 2006 and June 2008, as surging food and oil prices kept inflation above the target. Since then, the bank has cut the rate five times to 7.5 percent as economic growth plunged and inflation eased.
Mboweni left rates unchanged on June 25 when 21 out of 24 economists surveyed by Bloomberg predicted he would lower it by half a percentage point. The governor cited rising energy costs as the main risk to inflation, which slowed to 8 percent in May.
Marcus today declined to comment on whether she will stick to the inflation-targeting mandate, adding that it was “too early” to be asked questions on that payday loans. She said she will follow a policy of “engagement.”
“Markets will be wary because she is considered an insider of the ANC,” said Peter Attard Montalto, an emerging markets analyst at Nomura International Plc in London.
‘Substantial loss’
Marcus left the central bank in 2004 and was appointed by Absa, South Africa’s largest retail bank, in March 2007.
“That’s quite a substantial loss for Absa but quite a gain for the country,” Jacques Schindehutte, the company’s finance director, said in an interview.
Her experience in business may dissuade her from making policy changes, Graeme Korner, a fund manager at Nedbank Ltd.’s BoE Private Clients said in an interview.
The fact that “she has sat on the other side of the fence gives her good perspective,” he said. “I don’t think the markets are going to be too concerned. In fact this may be quite a comfort.”
The rand posted its first gain against the dollar in three weeks last week, appreciating 2.3 percent to 8.0519 to the dollar. Government bonds advanced in the week, with the benchmark 13.5 percent security due September 2015 yielding 8.56 percent, 10 basis points lower than its close on July 10. Yields move inversely to bond prices.
Exile in London
Marcus sat on the ANC’s National Executive Committee, the party’s top decision-making body, between 1991 and 1999, before moving to the Reserve Bank. She has also served as deputy minister of finance and spent time in exile in London during apartheid.
Economists and unions expected the Reserve Bank to continue cutting interest rates in June as Africa’s biggest economy shrank an annualized 6.4 percent in the first quarter, the most in almost 25 years. The country shed 179,000 non-farm jobs in the same period, pushing the unemployment rate to 23.5 percent, the highest of 62 countries tracked by Bloomberg.
“In terms of the Constitution, the primary objective of the South African Reserve Bank is to protect the value of the currency in the interest of balanced and sustainable growth,” Zuma said today. “The Reserve Bank must perform its functions independently and without fear, favor or prejudice.”
Military Training
Mboweni has also been criticized for not doing more to weaken the rand, which has surged 18 percent against the dollar this year, the second-best performer of 16 major currencies tracked by Bloomberg after Brazil’s real. A stronger rand cuts profits for the country’s export industries including gold and platinum mining.
Mboweni spent a decade in exile, undergoing military training in Angola before moving to the ANC’s headquarters in Zambia’s capital Lusaka in the 1980s to research economic policy.
After the ban on the ANC was lifted by the apartheid government in 1990, he joined the party’s economic policy unit in Johannesburg, working with Trevor Manuel, who became finance minister in 1996, and Maria Ramos, now chief executive officer of Absa.
He declined to comment on his future plans.