The new chief of the Re­serve Bank has his work cut out for him, but he’s sure his broad shoul­ders can carry the load

CityPress - - Business - MOY­AGABO MAAKE moy­agabo.maake@city­

Calls from unions to na­tion­alise the SA Re­serve Bank, one of only a few pri­vately owned cen­tral banks in the world, are on the in­crease. In­fla­tion, which hit 6.4% year on year in Au­gust, is out­side the bank’s tar­get range of be­tween 3% and 6%. The col­lapse of mi­crolen­der African Bank had an­a­lysts ques­tion­ing the ef­fi­ciency of the cen­tral bank’s su­per­vi­sion depart­ment.

Eco­nomic growth is slow­ing – the bank’s fore­cast of 2014 gross do­mes­tic prod­uct growth is just 1.5%, a down­ward re­vi­sion from 1.7%.

Th­ese are some of the is­sues fac­ing in­com­ing Re­serve Bank gov­er­nor Le­setja Kganyago.

But the af­fa­ble Kganyago jokes dur­ing an in­ter­view with City Press that his broad shoul­ders can carry the weight of his new re­spon­si­bil­i­ties.

“I feel I will be up to the chal­lenge,” he says, point­ing out that the team out­go­ing gov­er­nor Gill Mar­cus has put in place is ex­cel­lent and will help steer the ship.

And as he in­di­cated when Pres­i­dent Ja­cob Zuma an­nounced his ap­point­ment at the Union Build­ings on Mon­day, he will not tear down the house Mar­cus built.

The mon­e­tary pol­icy com­mit­tee – which sets in­ter­est rates and is com­posed of the gov­er­nor, three deputy gover­nors, two ad­vis­ers and the head of the re­search depart­ment – will stay the same.

“The pres­i­dent must find a deputy gov­er­nor,” he says. This seat will be empty when he takes on his new role.

How­ever, Kganyago ap­peared to hint that some changes were afoot dur­ing his colour­ful speech at the Union Build­ings when, re­fer­ring to Fi­nance Min­is­ter Nh­lanhla Nene, he said: “The Cab­i­net mem­ber re­spon­si­ble for fi­nan­cial mat­ters ... is here. I have his tele­phone num­ber. I know where he stays. There will be reg­u­lar con­sul­ta­tions.”

Rand Mer­chant Bank economist Mamello Matik­inca high­lighted this in a note to clients.

“It seems there will be closer co­or­di­na­tion be­tween fis­cal and mon­e­tary pol­icy,” Matik­inca said.

“While he will face a dif­fi­cult time ahead – bal­anc­ing weak growth, rel­a­tively high in­fla­tion and ex­pec­ta­tions of pol­icy nor­mal­i­sa­tion by the Fed­eral Re­serve – his ap­point­ment should, nev­er­the­less, en­sure pol­icy con­tin­u­a­tion.”

Kganyago said he did not feel the bank did not co­or­di­nate with the depart­ment be­fore, but he was merely cit­ing the Con­sti­tu­tion, which re­quires the cen­tral bank to pur­sue its pri­mary ob­jec­tive of pro­tect­ing the value of the rand in the in­ter­est of growth while hav­ing reg­u­lar con­sul­ta­tions with the Cab­i­net mem­ber re­spon­si­ble for na­tional fi­nan­cial mat­ters.

The bank in­di­cated in its July mon­e­tary pol­icy state­ment that it would grad­u­ally hike in­ter­est rates, but this would de­pend on eco­nomic data.

For now, the bank’s own data show con­sumer fi­nances are un­der pres­sure. Last week, the growth of credit ex­ten­sion to house­holds slowed 3.6% year on year from 4.1% pre­vi­ously.

In July 2014, 28 514 civil judg­ments for debt amount­ing to R350.3 mil­lion were recorded, ac­cord­ing to Stats SA.

If the bank hikes rates as ex­pected, econ­o­mists ex­pect the sit­u­a­tion to worsen.

The ma­jor unions are de­mand­ing the bank cut rates. The Na­tional Union of Me­tal­work­ers of SA (Numsa) says in­ter­est rates are “killing in­debted work­ing class peo­ple”, cit­ing statis­tics from the Na­tional Credit Reg­u­la­tor show­ing that more than half of the coun­try’s 20 mil­lion bor­row­ers were credit im­paired.

African Bank’s col­lapse was mainly blamed on a huge num­ber of loans go­ing into ar­rears as con­sumers IN THE POUND SEAT Le­setja Kganyago, the newly ap­pointed gov­er­nor of the Re­serve Bank


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