Zuma Fuels Speculation in Delaying Naming Central Bank ChiefRene Vollgraaff
South African President Jacob Zuma’s delay in naming a new central bank governor is fueling speculation ranging from an external candidate being chosen to the government abandoning its inflation-targeting policy.
In the week since Governor Gill Marcus, 65, surprised financial markets by announcing she won’t renew her five-year contract when it expires on Nov. 8, Zuma’s office and Finance Minister Nhlanhla Nene have provided little clarity on her successor. Zuma’s spokesman, Mac Maharaj, said by phone today there’s no indication yet when the president will make the appointment.
“The delay in the announcement is very bad for the economy,” Jannie Rossouw, a former secretary of the Reserve Bank and now head of the school of economic and business sciences at the University of the Witwatersrand in Johannesburg, said by phone on Sept. 22. “It increasingly creates the impression that the new governor will come from outside the bank and also that the bank’s mandate could change with an outside candidate.”
While Marcus’s two deputies, Lesetja Kganyago and Daniel Mminele, have emerged as favorites to succeed her, local newspapers have speculated that Zuma may choose an external candidate with stronger ties to the ruling African National Congress.
Brian Molefe, head of the state-owned rail operator Transnet SOC Ltd., and former Deputy Finance Minister Jabu Moleketi may be potential candidates, Johannesburg-based Business Day, the country’s biggest business newspaper, said on Sept. 19, citing an unidentified Zuma ally.
“I would have preferred for this to be done in a different way, where Marcus’s successor was announced at the time that she announced that she would not be serving a second term,” Peter Worthington, an economist at Barclays Plc’s Johannesburg-based investment banking unit, said by phone on Sept. 23. “It’s adding to uncertainty.”
Nene told reporters in Pretoria today that the government isn’t under pressure to name Marcus’s successor as she remains in her position until November.
“The process is already underway,” he said. “It’s not going to be a rushed process.”
The rand has weakened 1 percent against the dollar since Sept. 18, when Marcus announced her decision that she’s stepping down. The currency fell 0.6 percent to 11.1938 as of 3:24 p.m. in Johannesburg.
The lack of clarity from Zuma’s office has fueled speculation from New York-based DaMina Advisors LLP that the central bank may abandon its inflation target of 3 percent to 6 percent, or that the government will adjust the mandate to include economic growth goals.
“The longer they wait, the more the uncertainty builds up and the last thing this country needs at the moment is uncertainty,” Maarten Ackerman, an investment strategist at Citadel Wealth Management, which manages the equivalent of about $2.8 billion, said by phone from Cape Town on Sept. 23. “The fact that they are keeping quiet and not announcing a solution that the market would like is also reflected in the rand.”
Nene said in a Sept. 20 interview in Australia that there are skills within the bank to find a suitable replacement for Marcus. At the same time, he said there are candidates outside the central bank with appropriate abilities who could do the job. Legislation governing the central bank says the governor must have banking experience.
“The optimal situation would be to get an appointment as soon as possible,” Ettienne le Roux, an economist at FirstRand Ltd.’s Johannesburg-based investment banking unit, said by phone on Sept. 23. “The longer the president waits, the more unnecessary speculation we will see.”