Here’s why 2019 will be an interesting year for SARB

JOHANNESBURG — Changes at the top of the South African Reserve Bank could hold a lot of sway over the frequency of interest rate hikes in 2019 through to 2020. This year, we will find out if Lesetja Kganyago will be given another term at the top. Amid the global recognition he’s received, he certainly deserves another term, but it will be up to our country’s body-politic to decide his fate. Meanwhile, resignations around Kganyago have further opened up room for other personnel changes – a factor that could introduce a more dovish element into the Monetary Policy Committee (MPC). There’s no doubt, though, that all eyes will be on SARB this year amid hopes of an economic rebound and an election result that ensures stability. – Gareth van Zyl

By Rene Vollgraaff and Prinesha Naidoo

(Bloomberg) — South African Reserve Bank Deputy Governor Francois Groepe has resigned, leaving only five people on the central bank’s rate-setting panel.

He will leave at the end of the month, which is after the Monetary Policy Committee’s next interest-rate decision on Jan. 17. Groepe has been a deputy governor and member of the MPC since January 2012.

The MPC increased its benchmark rate in November even as half of the six panel members favored an unchanged stance. The central bank’s quarterly projection model shows four more rate increases of 25 basis points each by the end of 2020. While inflation accelerated to an 18-month high in November, it remains inside the bank’s 3 percent to 6 percent target band.

The announcement comes at the start of a year in which the current terms of Governor Lesetja Kganyago and Deputy Governor Daniel Mminele run out. Kganyago has said he’d be available to serve another term if asked. Mminele hasn’t commented on the matter.

The process of choosing a successor is under way, the central bank said in a statement Wednesday. The Reserve Bank governor and his three deputies are appointed by the president of the country, making Groepe’s replacement the first senior executive selected by President Cyril Ramaphosa after he took over from Jacob Zuma as leader of the country last year.

Only two of the current MPC members don’t hold the position of governor or deputy governor. Fundi Tshazibana is an adviser to Kganyago and Rashad Cassim is the head of economic research.

Tshazibana, who is the only woman on the panel and was an alternate executive director on the International Monetary Fund’s executive board before being appointed at the Reserve Bank last year, is a possible candidate to replace Groepe, according to George Herman, chief investment officer at Citadel Investment Services. She was head of the economic policy and forecasting division and a deputy director general at the National Treasury before working for the IMF.

“President Ramaphosa would do brilliantly by sticking to the recipe of utilizing the experience and knowledge bred in National Treasury,” Herman said by text message. “Tshazibana would be the ultimate candidate given the current environment of uncertainty. She brings global experience combined with a South African understanding.”

What Our Economist Says …

The resignation of Groepe is likely to make it more difficult to push through further rate hikes in 2019. We assume that Groepe has voted together with Kganyago and Mminele for higher rates in a number of split votes over 2016-2018 and it cannot be taken for granted that his replacement will share this hawkish stance. It is highly possible that Groepe’s replacement will be more inclined toward the dovish camp on the MPC and focus more on domestic conditions.

–  Mark Bohlund, Bloomberg Economics

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