South African Reserve Bank Governor Tito Mboweni can be proud of being part of a team that implemented sound economic policies, but he has faced stiff criticism for defending inflation targets.
The central bank confirmed on Friday that the 49-year old Mboweni did not intend to renew his contract when his second five-year term ends in August next year.
Since becoming the first black official to take the post in August 1999, Mboweni gained the market’s confidence by jealously guarding the bank’s independence and improving transparency through bi-monthly monetary policy committee (MPC) meetings.
He told CNBC Africa last month that one of his proudest achievements was bringing a long-standing negative reserves position into balance early in 2004. Reserves have since swelled to more than $30-billion.
But he is aware that he will leave a mixed legacy.
”How I wish my term would have ended two years ago; I would have been a hero,” he told the Institute of Bankers in July, referring to days when inflation was still within the bank’s 3% to 6 % target band and interest rates were their lowest in more than two decades.
”Now I would be remembered as the guy who raised interest rates,” he quipped in his usual charming way that has endeared him to audiences.
The central bank has raised its repo rate by 500 basis points since June 2006 to try to arrest inflation. South Africa’s targeted CPIX (consumer inflation less mortgage costs) inflation jumped to a new record 13% year-on-year in July from 11,6% in June.
Mboweni’s determination to battle inflation and shore up the central bank’s reserves won wide respect in markets, but the latest interest-rate moves raised the ire of allies of the African national Congress and debt-laden consumers.
The Congress of South African Trade Unions and the South African Communist Party — which have grown in influence since they helped Jacob Zuma take control of the ANC — will perhaps be happy to see Mboweni go.
Tailored suits
Zuma is expected to take over the national presidency in mid-2009 and it will be his prerogative to appoint Mboweni’s successor.
Mboweni has defended the central bank’s policy of inflation targeting with gusto, going as far as to say the policy would be maintained even after elections in 2009.
”I hope one day, before I retire, I will hear them say Viva inflation targeting because this policy is good for the poor,” is a common rebuttal to his union and communist detractors.
Even with the market, Mboweni has been daring, risking his credibility.
In May he spooked investors by suggesting that a 200-basis-point rate rise was ”possible” in June, but then raised rates by the usual 50 basis points, sending the bond market into a spin.
He later explained it as a misunderstanding, the only time this usually cool-headed central banker looked out of sorts.
Mboweni’s penchant for wine and cigars betrays his labour background and his humble roots in Limpopo. He was a prominent activist in the struggle against apartheid and earned a masters degree in development economics from Britain’s University of East Anglia.
His tailored suits give him his statesmanlike look and that is the image he likes to portray. Photographers are banned at MPC press briefings, since one took an unflattering picture of him wiping sweat from his face.
In an interview with CNBC Africa, Mboweni said he had not decided what he would do after leaving the bank. — Reuters