New era for Reserve Bank

Monday, July 20, 2009

Pretoria - Can South Africans expect a new approach to the monetary policy of the Reserve Bank? Will there be a significant shift from the inflation-targeting monetary framework that has been followed by the bank in the past decade?

These are some of the questions that are being asked following the announcement that Gill Marcus, the former Deputy Governor of the South African Reserve Bank (SARB), has been appointed to take over from inflation combatant Tito Mboweni.

Since 1999, government formally adopted an inflation- targeting monetary policy framework aimed at targeting the rate of inflation directly, instead of following the previously applied "eclectic" monetary policy approach in which intermediate objectives still played a prominent role.

As the head of the SARB, Mr Mboweni had to oversee this process and has at times been required to make decisions that were not always popular.

While Mr Mboweni has not been the darling of the unions, he has often been praised for his hard work and high degree of confidence to ensure stable conditions in the financial sector during his 10-year tenure at the SARB.

Taking over from Chris Stals in 1999, many think, Mr Mboweni, the first black reserve bank governor, has done enormously well.

Ms Marcus comes in at a challenging time for markets as the world finds itself in deep financial crisis with South Africa's economy stepping into recession.

But analysts in the sector are confident that the SARB will be in the right hands. "She is an engaging person; you can talk to her anytime and she always listens," said Tony Twine from Econometrix.

He described the current ABSA chairwoman as a charismatic individual who will work fairly well with markets.

"Mr Mbweni will be missed no doubt about that; but the markets appear to be relaxed and highly positive regardless of the announcement of his departure.

"I think the reason for that is perhaps the markets anticipate working fairly well with Marcus," said Mr Twine.

Mr Twine believes there will be no changes in the inflation-targeting approach applied by the bank under Mr Mboweni but that there could be more emphasis on some areas.

"I would not expect significant changes really, there might be changes in emphasis," he said.

The mandate of the Reserve Bank remained the same, irrespective of who occupied the position of governor.

As a former Deputy Finance Minister and chairwoman of one of the biggest banks in Africa, ABSA, Ms Marcus is no stranger to the markets.

She also has political know-how required for the job having played a crucial role in the country's liberation, as an activist of the African National Congress in the 1980s.

She has all the support she needs as she takes over one of the toughest jobs in the country.

"It is really such an important time in the world for us to have organisational cohesion, and to work together in terms of what we need to do in the interests of the country.

"I hope the style of leadership that I bring to the Reserve Bank is the style of leadership that I have exercised wherever I am and have been, and that is one of engagement," commented Ms Marcus, following the news of her appointment on Sunday.

She said part of what she intends in her early days would be to listen and to learn and see where the SARB is at this point in time.

"So the style in leadership must be in my view reflective of the principles by which I've operated in all the positions I have had so far.

"I don't see it changing and if it does I am sure there are enough people to pull me back to earth," she said.

Meanwhile, a section of the business sector has already expressed its excitement about the new governor.

South African Chamber of Commerce and Industry (SACCI) Chief Executive Officer, Neren Rau, said Ms Marcus's experience as Deputy Governor of the SARB from 1999 until 2004, Deputy Minister of Finance and her more recent experience as Chair of ABSA uniquely equip her for the challenges she faces.

"Under the leadership of Governor Marcus, business is assured of prudent implementation of monetary policy and an openness to engage with economic stakeholders," Mr Rau said.

He saluted Governor Mboweni for the contribution he made over a decade of leadership at the SARB.

"Governor Mboweni will be remembered for the consultative manner in which he implemented monetary policy and for making monetary policy accessible."