The South African Reserve Bank (SARB) finds itself at a critical juncture, seeking a new Deputy Governor amidst a landscape where governmental entities struggle to align on an appointment. This discord arises amid apprehensions of potentially tipping the scales of the Monetary Policy Committee (MPC) with another hawkish voice.
With Kuben Naidoo’s departure from the Deputy Governor position last year and his current gardening leave status, the SARB is tasked with filling the void, seeking a third deputy to complement Rashad Cassim and Fundi Tshazibana.
Presently, the Monetary Policy Committee (MPC) comprises three additional members: Governor Lesetja Kganyago, Chris Loewald heading the bank’s economic research department, and David Fowkes, an advisor to the governor.
Reports from the Business Times indicate a lack of consensus between the National Treasury and Finance Minister Enoch Godongwana, who advocate for Mampho Modise, head of the public finance division at the Treasury, to succeed Naidoo.
Contrarily, Governor Kganyago favors Unathi Kamlana, the commissioner of the Financial Sector Conduct Authority (FSCA), sparking speculation about a power consolidation motive within the Treasury.
This disagreement stems from concerns raised by the finance minister regarding the potential addition of another hawk to the MPC. Hawks advocate for inflation control through stringent monetary policies, while doves, like Naidoo, advocate for economic expansion via lower interest rates.
Economist Dawie Roodt suggests that appointing the new deputy from the Treasury would be beneficial due to its regular engagement with the SARB on monetary and fiscal matters.
Ultimately, the decision rests with President Cyril Ramaphosa, who holds the authority to appoint a new deputy. Kganyago has previously indicated the need for an additional committee member, aiming for an odd-numbered committee to prevent a deadlock in decision-making.
Anticipated Market Movements
Despite Governor Kganyago’s inclination towards hawkish policies, Thalia Petousis from Allan Gray anticipates an interest rate cut by mid-year. However, inflationary risks loom large, driven by factors such as load shedding, Transnet’s challenges, the El Nino weather phenomenon, robust US labor and wage growth, and recent Red Sea disturbances.
The SARB’s model forecasts a cautious approach to interest rate reductions, envisaging a modest decline in the repo rate from 8.25% to 7.3% by the end of 2025, still elevated compared to pre-pandemic levels.
Petousis underscores the SARB’s commitment to price stability in the face of global inflationary pressures, indicating a preference for more conservative monetary policies than in the past.
In conclusion, the quest for a new Deputy Governor underscores the intricacies of monetary policy formulation in South Africa, where balancing inflation control with economic growth imperatives remains a delicate task amidst a backdrop of global and domestic uncertainties.
