Ramaphosa Opts for Continuity at Central Bank as Kganyago Stays

JOHANNESBURG (Capital Markets in Africa) – South African President Cyril Ramaphosa has reappointed Lesetja Kganyago as governor of the Reserve Bank and named two deputies from his existing team, ending uncertainty about the top management at one of the nation’s key economic institutions.

Kganyago will serve another five years after his first term ends in November, the Ministry of Finance said in an emailed statement Wednesday. Ramaphosa also appointed Monetary Policy Committee members Fundi Tshazibana, who served as an adviser to Kganyago, and Rashad Cassim, the institution’s head of research, as deputy governors from August.

The central bank head has vehemently defended the independence of the institution against attacks from some politicians, labor unions and the nation’s anti-graft ombudsman. Kganyago’s return is likely to ease investor concerns that the Reserve Bank will become more pliable to political pressure, and confirmation of his second term four months early ends speculation about his future.

Kganyago is known by the markets and his appointment will reassure investors that the Reserve Bank “is in good hands,” Dawie Roodt, chief economist at the Efficient Group, said by phone. “There was a real danger that more of a populist could be appointed and that would have been an issue.”

Still Five
The rand was 0.4% stronger against the dollar at 13.9330 as of 7:25 a.m. in Johannesburg, extending Wednesday’s gains of 1.4% sparked by dovish comments by U.S. Federal Reserve Chairman Jerome Powell.

Tshazibana and Cassim’s appointments come after Daniel Mminele retired as deputy governor when his second five-year term ran out at the end of last month and Francois Groepe resigned January.

Naming two existing MPC members as deputy governors means the interest-rate setting panel has still got only five members. Chris Loewald, who was appointed last month, is the only MPC member who doesn’t hold the post of deputy governor or governor and will be the only new person who takes part in the deliberations when the panel decides on interest rates next week.

Effectively the only change to the composition of the MPC is that Loewald replaced Mminele, who was seen as hawkish. Markets are pricing in an 80% chance of a 25-basis point cut on July 18.

What Bloomberg’s Economist Says
The success in reducing inflation expectations in tandem with price growth and a shift in expectations for developed-market interest rates is likely to make Kganyago and other MPC members more amenable to reducing the benchmark rate in the second half of the year. We expect a 25-basis point rate cut to 6.5% on July 18.–Mark Bohlund, economist. Source: Bloomberg Business News