Politics may be the key factor in SARB succession
Just how political is the job of a senior central banker? We may find out soon, as President Cyril Ramaphosa must appoint a new deputy governor to replace Kuben Naidoo, who resigned recently. Governor Lesetja Kganyago is in the last year of his second five-year term at the helm — and all this is happening in what could prove to be a momentous election year.
South Africa has had highly regarded people with an ANC background leading the Reserve Bank since the advent of democracy. Kganyago, like his predecessors Tito Mboweni and Gill Marcus, is a blue-blooded party member.
Kganyago was among the technocrats earmarked for a crucial state role when the ANC came to power. His contemporaries include the discredited Brian Molefe — OK, that’s a bad example, but even in the eyes of his worst critics Molefe cannot legitimately be accused of incompetence. Enough about him and back to Kganyago.
The governor is one of the last of the civil servants with a blue-chip struggle background, and his replacement will have very different political credentials. Political acumen helps at the highest levels of state, as difficult conversations become more constructive when technocrats can look at politicians, including ministers, as their political equals. It’s also easier for Kganyago to push back against them if he needs to.
When he does go, Kganyago will be remembered for standing firm against populist ideas. In one of his speeches he said: “Populism wins supporters in part because it speaks to ordinary people about real problems — problems other leaders can be too embarrassed or nervous to confront.”
Of course, some will judge him for his perceived whitewashing of Ramaphosa in the Bank’s investigation into the Phala Phala scandal.
In the ANC, there is always the underlying assumption that the state owns the Reserve Bank. Add to that the idea that the Bank can print money.
The ownership idea is driven by the misguided belief that the directors of the Bank, or its shareholder representatives, have a say in interest rate decisions. That’s the impetus for calls for state ownership of the Bank. But we can’t rule out the possibility that some shareholders see an opportunity to strike gold when the state buys them out and are therefore also behind some of those calls.
The ANC’s poor grasp of economics makes the Bank prone to unsound calls for its nationalisation.
Trevor Manuel, the former finance minister, told me as early as 2012 that economic discussions in the ANC tended to be “sucked” in the wrong direction because of the party’s economic orientation. “We beat each other up over the wrong things,” he said. A lack of understanding of economic fundamentals sidetracked crucial economic debates. The party needed a broader approach, as well as skilled delegates at conferences who could look at all the important factors when discussing policies.
“It’s like maskandi music. If you only listen to the base, there’s no music. You need the guitar and the voices in there. If you want economic policy, you can’t just listen to the base — that’s all that macroeconomic policy is, but you can’t do without it. You need the fine sounds that come from a maskandi guitar and your voices to produce the sound.”
Manuel said the party often discussed economic policy without considering the world outside its politics — such as ratings agencies and fund managers, as well as factors such as savings ratios — which hampered ambitious development plans. A decade later, what Manuel said still stands.
As Ramaphosa prepares to find a replacement for Naidoo, one wonders what his criteria will be. The National Treasury has been a good hunting ground for Kganyago whenever he needed talent. However, continually using the Treasury as a fishing pond may help entrench the growing view that the Bank is more concerned with the government spending side in its reading of the economy, instead of focusing strictly on macroeconomic policy.
When he looks for a deputy governor, Ramaphosa will probably consider Kganyago’s views or the dynamics around him and the current team. Like Kganyago, Naidoo cut his teeth at the Treasury, but he is seen as a dove on the monetary policy committee.
Finding a counterweight to Kganyago may well be the thing Ramaphosa needs right now. Naturally, he will seek the counsel of finance minister Enoch Godongwana, who is the political figure under whom the central bank falls. The question is how Godongwana would feel if he were again to lose a senior civil servant to Kganyago.
Also, Kganyago’s expiring tenure is fast becoming an urgent topic for his consideration. Is it the kind of thing that can wait until the second half of the year? In addition to economic policy qualifications and leadership experience, the political environment is clearly one of the unwritten factors that will need to be considered.