Praise for SA’s central bank governor

16 October 2012

South African Reserve Bank governor Gill Marcus has been named sub-Saharan Africa’s central bank governor of the year by respected online publication Emerging Markets.

In an article announcing the choice of Marcus on Friday, Emerging Markets said praised Marcus “for her ability to correctly predict where the global economy was going and to act to limit the spillover on South Africa”.

The publication cited the South African Reserve Bank’s (SARB’s) decision to cut its key repo (repurchase) rate by 50 basis points to 5% in July – bringing the prime rate at the country’s retail banks down to 8.5% – noting that this had gone against consensus expectations “but had been justified in the light of slightly slower than expected economic growth in the second quarter”.

The SARB’s monetary policy committee had kept the repo rate at 5.5% – a more than 30-year low – for nine meetings prior to this. The repo rate is the rate at which the SARB lends money to South Africa’s banks.

Inflation back within range

Mark Bohlund, senior sub-Saharan African economist at analysts IHS Global Insight, told Emerging Markets that Marcus had successfully brought South Africa’s annual headline inflation back inside the SARB’s target range of 3.0 to 6.0%.

He said that South Africa’s bank were highly regarded, and had come through the global financial crisis of 2008-09 relatively unscathed compared to their US and UK peers.

“If they had taken a similar hit, South Africa would not be in a position to do what they have done, and that’s at least in part due to the supervisory ability of the SARB,” Bohlund said.

Marcus to take over as Reserve Bank governor in November 2009. As a former deputy finance minister, a former deputy governor of the Reserve Bank, and at the time chairwoman of Absa, one of the biggest banks on the continent, Marcus was no stranger to the markets.

She also had the political know-how required for the job, having played a crucial role in South Africa’s liberation as an active member of the ruling African National Congress (ANC) during the 1980s.

Complacency ‘would be premature’

“I do think we’ve had some achievements, but I think one should temper that with a question of saying things are changing rapidly and things are extremely difficult,” Marcus said in an interview with Emerging Markets last week.

“I think for anyone in a central bank or a fiscal policy commission for a government side … it would be very premature to look at achievements and rest on the laurels and be complacent.”

In September, the SARB’s monetary policy committee left its repo rate unchanged at 5%, which Marcus said aimed to keep inflation at bay while encouraging growth in the economy.

“We try to focus on the medium-term horizon, but we try to avoid excessively variable interest rate movements or a knee-jerk reaction to changes in the inflation outlook,” Marcus told Emerging Markets.

“We try to see where [inflation] could go, how it could go, what’s driving it, is it domestic, is it exogenous, is it driven by things that we have some control over … and we try to avoid over-reacting to the exogenous shocks, even if they have been significant. This can only be done successfully if inflation expectations are relatively well anchored.”

SAinfo reporter