Marcus moves into Reserve Bank hot seat

The tenure of South African Reserve Bank (SARB) governor Tito Mboweni ended on Friday and incoming Governor Gill Marcus faces her first test as the market expects a decision on the dates of monetary policy committee (MPC) meetings to be held in 2010.

To accommodate radical economic movements during the recession, Mboweni and the MPC earlier this year decided to change the usual bi-monthly meetings to monthly ones.

It is possible Marcus could revert back to bi-monthly as signs of recovery emerge and pressure mounts from left-wing groups for lower interest rates at every turn.

“The incoming governor will be faced with her first baptism of fire in the form of the announcement regarding date changes for the MPC meetings in 2010 and perhaps an adjustment to the remainder of this year’s meetings,” said an asset manager in the fixed-income market.

The market sees this as a “new era” at the bank. Talk has been that Marcus and Mboweni did not get on when she was his deputy between 1999 and 2004. It is likely that a new era in style of leadership awaits, but whether leftward shifts will be accommodated in actual policy remains to be seen.

After all, the MPC does not operate on a strict voting basis, but rather consensus, and thus the mandate of the bank of price stability will likely continue to trump populist demands, albeit with a more conciliatory demeanour attached.

Marcus, with a commerce degree, may not have the traditional doctorate seen as common among heads of central banks (including the local central bank - although Mboweni had a master’s), but she has earned her stripes in the real world. She was a member of Parliament from 1994 to 1998 and was deputy minister of finance from 1996 to 1999.

There are rumours she may have been heavy handed at times when Absa chairperson, so it remains to be seen how she takes to the delicate balancing act between political and the market interests that awaits. Also internally, she will have to manage some high-profile, well-connected, individuals.

“Consensus seems to view this appointment favourably, in particular from a communication perspective. Time will tell whether this will indeed be the case,” said the asset manager.

Marcus’s first MPC meeting is currently set for November 16 and 17. We will have to wait and see whether she and the MPC rule to keep the December meeting in place.—I-Net Bridge

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