Rites of pas­sage for three of Africa’s lead­ing cen­tral bankers

Business Day - - NATIONAL - Pri­ne­sha Naidoo and So­lape Ren­ner

The pos­si­ble re­place­ment of the gover­nors of three key African cen­tral banks in 2019 could yield an un­ex­pected sur­prise: pol­icy sta­bil­ity.

Time is run­ning out on the first terms of SA’s Le­setja Kganyago, Nige­ria’s God­win Eme­fiele and Kenya’s Pa­trick Njoroge. While all three are el­i­gi­ble to serve an­other term at the helms of their cen­tral banks, this is not guar­an­teed.

Still, deep­en­ing in­sti­tu­tional strength means there should be broad buy-in of the poli­cies these gover­nors have over­seen, ac­cord­ing to an­a­lysts in­clud­ing Razia Khan, chief econ­o­mist for Africa and the Mid­dle East at Stan­dard Char­tered Bank.

Here is a look at what the three gover­nors have achieved, and how likely they are to re­main in their po­si­tions:

Kganyago fought off a pro­posal by the pub­lic pro­tec­tor to change the Re­serve Bank’s in­fla­tion-tar­get­ing man­date in 2017 and is a strong voice for cen­tral bank in­de­pen­dence. His first term as gov­er­nor ends in Novem­ber and he has said he would be avail­able to stay on if asked. The Bank head is ap­pointed by the coun­try’s leader and there is no limit on the num­ber of terms.

With the ANC likely to re­tain its ma­jor­ity in the 2019 elec­tions, the de­ci­sion whether to re­tain Kganyago would be made by Pres­i­dent Cyril Ramaphosa.

By ap­point­ing Kganyago again, Ramaphosa would boost pol­icy cer­tainty and con­sis­tency at the cen­tral bank.

Whether Kganyago stays or goes, there will be changes in the Bank’s se­nior lead­er­ship.

Deputy gov­er­nor Fran­cois Groepe has re­signed and will leave the Bank at the end of Jan­uary, tak­ing the mon­e­tary pol­icy com­mit­tee (MPC) down to five mem­bers. Daniel Mminele’s sec­ond term as deputy gov­er­nor ends in June and he has not com­mented on whether he would be avail­able to stay. Kuben Naidoo’s term as deputy gov­er­nor ends in 2020.

Eme­fiele re­moved a naira peg in 2016 to al­low for a more mar­ket-driven cur­rency and per­sisted with tight mon­e­tary pol­icy that re­sulted in a grad­ual in­fla­tion slow­down, even as the econ­omy con­tracted.

The fu­ture of Eme­fiele, whose first term ends in June, is likely to be de­ter­mined by the out­come of Nige­ria’s Fe­bru­ary elec­tions, which are ex­pected to be closely con­tested. The pres­i­dent nom­i­nates the cen­tral bank head, and leg­is­la­tors have to ap­prove the ap­point­ment.

“So far, the gov­er­nor seems to have en­joyed a good work­ing re­la­tion­ship with this present ad­min­is­tra­tion,” Abio­dun Keripe, head of re­search at Elixir In­vest­ment Part­ners, said.

Since the end of mil­i­tary rule no Nige­rian cen­tral bank head has served more than one term. Still, a new bank gov­er­nor may not af­fect the in­ter­est rate tra­jec­tory there as the rest of the MPC would re­main mostly un­changed, Michael Famoroti, an an­a­lyst in La­gos at Ve­tiva Cap­i­tal Man­age­ment, said.

One of Njoroge’s big­gest chal­lenges has been the gov­ern­ment’s de­ci­sion to in­tro­duce rate caps, which he has said has frus­trated the cen­tral bank’s at­tempts to trans­mit mon­e­tary pol­icy. He has also had to deal with a dis­rup­tion of fi­nan­cial mar­ket sta­bil­ity after three banks were placed in re­ceiver­ship within a year of his tak­ing over the cen­tral bank. Njoroge’s four-year term ends in June and he may be reap­pointed.

“Njoroge, in my opin­ion, has played a tricky hand with con­sid­er­able fi­nesse,” said Aly-Khan Satchu, the CEO at Nairo­bibased Rich Man­age­ment.

“It would be a big net loss for Kenya Inc if his term wasn’t ex­tended.”

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