MPC to add a seventh member
● The Reserve Bank’s monetary policy committee (MPC) is looking for a seventh member, who is likely to be appointed once its newest member, Mampho Modise, has settled into her position.
“We will not rush. Deputy governor Modise must settle because she too now will have to give input into the appointment of the additional MPC member,” governor Lesetja Kganyago told Business Times in an interview last week.
He said while the MPC could have up to eight members, the common practice was to keep it at seven to ensure that a split decision on rates does not occur due to voting in even numbers.
“It’s a workable number. The MPC members are pretty rigorous in their debates.
“There is a diversity of thought. We can always do with one more piece of thinking. The last time we looked for an MPC member we looked outside and eventually discovered that the person we were looking for was in here and we did that.”
Modise took up the position of deputy governor at the beginning of April after Kuben Naidoo’s resignation last year. She was previously the deputy director-general for public finance at the National Treasury, and also worked at the central bank as an intern in 2004.
Business Times reported earlier that Kganyago had favoured Financial Sector Conduct Authority (FSCA) commissioner Unathi Kamlana as deputy governor. She worked closely with him at the Treasury when he was director-general, before he took over at the Bank. But President Cyril Ramaphosa, on the advice of the finance minister, opted for Modise instead. It’s not clear if Kganyago will court Kamlana for the seventh seat once it becomes available, but he hinted that the successful candidate could come from outside.
The MPC was aware of the importance of comparing skills and expertise already available inside the central bank with alternative perspectives from outside the institution to assess and “make sure that the central bank has the best that the country can offer”, said Kganyago.
“When Kuben Naidoo left, we had to distribute the work among ourselves because we were short of an executive. Deputy governor [Rashad] Cassim was given responsibility for the national payment system, which he had done before. We are doing a major renewal in the national payment system space so we decided that it must stay with the financial markets cluster.”
During his time as deputy governor, Naidoo was responsible for economic statistics, financial stability, prudential regulation, payments, banknotes and coins, and group risk. Kganyago said Modise’s portfolio of responsibilities would look much like Naidoo’s, including financial stability, economic statistics, risk management and compliance, and the fintech unit.
“In the business literature, they tend to say to people: ‘Give the executive a hundred days, and after a hundred days ask the executive how are you settling in and where are you going.’ She [Modise] has only been in the office for six working days,” he said.
The MPC is expected to make its next rates announcement on May 30, a day after the elections. There is a general consensus that it will keep rates at 8.25%.
Momentum Investments economist Sanisha Packirisamy said that due to lingering inflation risks, geopolitical tensions and worse than expected weather conditions, the Bank is expected to err on the side of caution as the MPC debates the interest rate trajectory.
Packirisamy said she was “anticipating the Bank to maintain interest rates at 8.25% in May and only cutting in the third quarter of 2024. We acknowledge increased risks to an even more delayed interest rate-cutting cycle due to global and local developments affecting inflation expectations and recent global central bank rhetoric, warning against the risks of a potential policy error associated with premature easing.”
She said while Momentum Investments continues to pencil in four interest rate cuts of 25 basis points each between this year and next year, there remained the risk of a later and even shallower interest ratecutting cycle.
On Wednesday, Stats SA announced that annual consumer price inflation (CPI) declined from 5.6% in February to 5.3% in March.
Housing and utilities inflation increased by 5.9% year on year and contributed 1.4 percentage points to CPI. Miscellaneous goods and services increased by 8.5% year on year and contributed 1.2 percentage points to CPI.
Food and non-alcoholic beverages increased by 5.1% year on year and contributed 0.9 percentage points to CPI. Transport increased by 5.3% year on year and contributed 0.8 percentage points to CPI.
We will not rush. Deputy governor Modise must settle because she too now will have to give input into the appointment of the additional MPC member
Lesetja Kganyago
Reserve Bank governor