Continuity at Bank welcome

SA’s constitution mandates the Reserve Bank to protect the value of the currency in the interests of balanced and sustainable growth. Additionally, financial sector legislation mandates the Bank to protect the country’s financial stability.

These mandates are crucial safeguards for SA’s economy, reining in inflation and preventing the government from printing money, as well as curbing excesses in its financial sector or financial markets. But legislative safeguards are only as good as those charged with doing the safeguarding. Which is why the announcement on the Bank’s leadership is such good news.

President Cyril Ramaphosa took forever to replace the Bank’s now-departed deputy governor Kuben Naidoo, who had approached the president last July to tender his resignation. But the president’s procrastination was worth it. On Friday Ramaphosa not only appointed a well-regarded senior Treasury official, Mampho Modise, to fill the vacant deputy post. He also reappointed the governor and the other two deputy governors for further five-year terms of office, which will start only once their terms of office end in August (in the case of the two deputies) and November (in the case of the governor).

The president’s bold move is to be welcomed. SA faces an uncertain environment, globally and locally. Central bankers in advanced economies such as the US are grappling with tough decisions about when to start cutting interest rates and tough questions about whether inflation and interest rates will go back to their pre-Covid lows. That is keeping capital flows and currencies volatile and uncertain and posing challenges for emerging market central banks such as our own. At home, the upcoming election poses risks to the rand and economy, especially if the ANC loses support and turns to populist coalition partners.

As it is, SA’s public debt is at levels which put pressure on interest rates, as well as posing risks to financial stability, because of the quantities of government debt which the financial sector is having to absorb. In the post-election environment over the next five years, the Bank’s task could become tougher.

All this makes it more important that the top leadership of SA ’ s central bank be independent, astute and credible. It is also an environment in which continuity in the leadership will be important, with the Bank implementing complex changes such as the gold and foreign exchange contingency reserve account transfer.

Ramaphosa has therefore, rightly, made it a clean sweep, locking in the governor and all three deputy posts to 2029. That will provide much-needed continuity at the Bank and comfort for the markets. The Bank’s credibility and its sound regulation of the financial sector have been positives that have often countered SA’s negatives such as its weak growth, load-shedding and policy uncertainty. Those positives have helped to keep SA on international investors’ radar screens and to support its credit ratings.

The Bank’s monetary policy management has helped to keep inflation at bay; its firm hand on the banking sector has helped to prevent political meddling and to keep the nation’s deposits safe.

The Bank often has to be the grown-up in the room. SA can take comfort that some grown-ups will be there in the turbulent times that might lie ahead.