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Africa Economic Institute

Gill Marcus Will Replace Mboweni as Governor of the South African Reserve Bank

  President Jacob Zuma announced on Sunday that South Africa's central bank governor, Tito Mboweni will step down on August 8, 2009 and will be replaced by Gill Marcus, who will take over the post on November 9, 2009.


President Jacob Zuma announced on Sunday that South Africa’s central bank governor, Tito Mboweni will step down on August 8, 2009 and will be replaced by Gill Marcus, who will take over the post on November 9, 2009.


“The market likes the pragmatism shown with the appointment of Marcus as Mboweni’s successor, given her wealth of experience in a broad spectrum of activities related to finance and policy,” said George Glynos, the managing director of Johannesburg-based Econometrix Treasury Management.


It has been reported that Mr. Mboweni raised the benchmark interest rate ten times in two years, from June 2006 to June 2008 to 12 percent as increasing food and oil prices put inflation over the government’s target rate. In the past year, from June 2008 to June 2009, the bank cut the rate five times and left it at 7.5 percent on June 25.


Gill Marcus was the former chairwoman of the ABSA Bank Group and was Mboweni’s Deputy Governor of the Reserve Bank from 1999 to 2004 and supported inflation targeting. President Zuma said, “She will prove a worthy successor to Mr Mboweni…Ms Marcus has extensive knowledge of the institution she is now called upon to lead, having served as deputy governor of the Reserve Bank from 1999 to 2004”.


Johan Rossouw, chief economist of Cape Town’s Vunani Securities has said, “Marcus is a very good choice. There won’t be too much deviation. Mboweni also expressed confidence in Marcus’ ability when he said that she was a good choice and “will do a very good job.”


“This change, to somebody within the system and is thought to reflect similar policy views to Mboweni, is a positive,” said Lars Christensen, head of emerging-market research at Danske Bank SA in Copenhagen. “There had been a view in the market that there was a risk, if Mboweni left, of radical change in monetary policy and the independence of the Reserve Bank would be undermined. This appointment has calmed those fears.”


The Congress of South African Trade Union, the largest Trade union federation who supported President Zuma during the election, disapproved of Mboweni’s reappointment and asked that the central bank revise its inflation targeting because consumer inflation has remained above the government’s target range. They also criticized Mboweni for not cutting interest rates faster. It was reported that the union COSATU supported Marcus’ appointment, but some economists, like Iraj Abedian believe that Ms. Marcus’ challenge will be to engage the Cabinet and the new Minister of Finance on the issue of inflation targeting, which many, like the COSATU are sensitive to.


Inflation was 8 percent in May 2009. Marcus’ appointment was taken as a signal that the government will continue pursuing a policy of price stability in South Africa, according to Nazmeera Moola, an economist at Macquarie First South Securities.


So far, the rand has strengthened up to 1.4 percent to 7.9381 per dollar, which is the highest level since July 7. It was trading at 7.9363 against the U.S. currency by 5:07 p.m. in Johannesburg from 8.0519 late on July 17, and it appreciated 0.7 percent against the euro to 11.2728.


The increase in the rand is thought to be a result from Marcus’ appointment, increasing commodity prices and improved emerging-market sentiment, according to Glynos. Gold and platinum have risen 1.7 percent and 1.4 percent, respectively.