Nov. 16 (Bloomberg) -- South African Reserve Bank Governor Gill Marcus, who took office last week, will probably pick up where her predecessor Tito Mboweni left off by keeping the benchmark interest rate unchanged tomorrow.

That may anger labor unions that had lobbied for Mboweni’s departure in the hope that his successor would cut interest rates faster to ease job losses and weaken the rand. Marcus, chairing her first Monetary Policy Committee meeting, will keep the repurchase rate at 7 percent, according to 21 of 23 economists surveyed by Bloomberg.

Mboweni kept rates steady at the previous two meetings on signs the economy may be recovering from its first recession in 17 years and as rising energy costs threatened to keep inflation above the government’s 3 percent to 6 percent target range. The Congress of South African Trade Unions, which helped propel President Jacob Zuma to power in May, wants the Reserve Bank to do more to stem job losses and cut a 24.5 percent jobless rate.

“Some things will likely change under the new Reserve Bank governor, but we believe these will have more to do with style than substance,” said Peter Attard Montalto, an economist at Nomura International Plc in London. “We expect rates to be unchanged” tomorrow.

Marcus, 60, became the ninth governor of the 88-year-old central bank on Nov. 9 after Mboweni declined to serve a third term. She helped implement the inflation-targeting policy at the central bank during her term as deputy governor from 1999 to 2004. Unions want a review of the policy, which they say is prolonging the recession.

Union Demands

“We hope the new governor will take a bold initiative of bringing down interest rates by 2 percentage points and break away from the dangerous policies of her predecessor,” said Cosatu spokesman Patrick Craven. “Interest rates are far too high in a period of deep recession.” If Marcus doesn’t make significant changes “we will oppose it very strenuously.”

Unions may be disappointed. Inflation, which slowed for a seventh month to 6.1 percent in September, has exceeded the central bank’s target range for more than two years. Price pressures may surge if Eskom Holdings Ltd., the state-owned power utility, is allowed to increase electricity tariffs by 45 percent a year over the next three years, as the company proposed last month.

Recession

The recession, which began in the fourth quarter last year, has also started to ease. The economy contracted an annualized 3 percent in the three months through June after plunging 6.4 percent in the first quarter, the statistics agency said on Aug. 18. Manufacturing output, which accounts for 14 percent of the economy, fell 11.4 percent in September, the smallest drop since December, the agency said on Nov. 10.

Unions are scoring some successes. ANC Secretary-General Gwede Mantashe said yesterday that the ruling party had agreed with its labor union and Communist Party allies at a three-day conference in Johannesburg that the mandate of the central bank must be reviewed and broadened. “In view of the current economic crisis, we can’t just say the mandate is right as is,” Mantashe told reporters.

While the rand’s 42 percent surge against the dollar since the beginning of March may help to curb inflation, the currency’s gains are also hurting exporters, hindering the economic recovery. Seardel Investment Corp., South Africa’s biggest clothing and textile-maker, said on Nov. 5 the strong rand is of “significant concern” because it’s made the local industry uncompetitive.

‘Killer’ Rand

Trade Minister Rob Davies said a strong rand is a “killer for the economy” and will undermine the country’s industrial policy, Johannesburg-based Business Day reported today, citing Davies. The rand gained as much as 1 percent against the dollar to 7.3428 and was at 7.3590 as of 6 p.m. in Johannesburg.

Lower interest rates may help to weaken the rand. South Africa’s benchmark rate compares with 1 percent in the euro region and between zero and 0.25 percent in the U.S.

“If there’s one reason to cut, it’s because of the rand,” said Colen Garrow, an economist at Brait SA in Johannesburg, who expects a half-point rate reduction tomorrow. “Inflation is looking after itself, but economic growth needs nurturing.”

Event                                             Date
Lonmin Plc annual earnings                        Nov. 16
Barloworld Ltd. annual earnings                   Nov. 16
Simmer & Jack Mines ltd. quarterly earnings       Nov. 16
JD Group Ltd. annual earnings                     Nov. 16
Reserve Bank interest rate decision               Nov. 17
Bidvest Group Ltd. annual general meeting         Nov. 17
SABMiller Plc first-half earnings                 Nov. 17
Retail sales data                                 Nov. 18
Reserve Bank’s monetary policy forum              Nov. 18
Glenrand MIB Ltd. annual general meeting          Nov. 18
William Tell Holdings Ltd. annual general meeting Nov. 18
Illovo Sugar Ltd. annual earnings                 Nov. 19
Investec annual earnings                          Nov. 19
Woolworths Holdings Ltd. annual general meeting   Nov. 19
Wits Gold Resources Ltd. first-half earnings      Nov. 20
Amalgamated Electronic Corp. annual general meeting Nov. 20
OneLogix Group Ltd. annual general meeting        Nov. 20
Chrometco Ltd. annual general meeting             Nov. 20

To contact the reporters on this story: Nasreen Seria in Johannesburg at nseria@bloomberg.net.

Last Updated: November 16, 2009 11:08 EST