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UPDATE 2-S.Africa central bank holds rates, rand dips as Marcus steps down
September 18, 2014 / 4:11 PM / 3 years ago

UPDATE 2-S.Africa central bank holds rates, rand dips as Marcus steps down

(Adds quotes, analyst and market reaction)

By Xola Potelwa

JOHANNESBURG, Sept 18 (Reuters) - South African central bank governor Gill Marcus, a steadying influence on Africa’s most advanced economy during five years of strikes, low growth and rising inflation, stepped down on Thursday, sending the rand to its weakest level in seven months.

Having kept interest rates on hold at 5.75 percent, the 65-year-old anti-apartheid activist-turned-banker used a Monetary Policy Committee (MPC) news conference to announce that she would be bowing out in November at the end of her term.

“This is my last MPC. I have advised the President some time ago that I would not be available for renewal,” Marcus said. The rand fell 0.5 percent to 11.1095 to the dollar, its weakest since February.

As well presiding over a period of historically low interest rates, Marcus has emerged as one of the most level-headed critics of South Africa’s economy and society, blaming both labour and big business for gradually declining productivity.

Marcus gave no clues about her successor, saying she was comfortable leaving as President Jacob Zuma would be able to draw on a “strong talent pool” in the bank, suggesting she would prefer an insider to take over.

“For markets, this might be the more rand-friendly response. As much as the independence of the institution - enshrined by South Africa’s constitution - is well-recognised, this would still be the more benign outcome,” Standard Chartered’s head of Africa research, Razia Khan, said.

Zuma said he would announce a replacement in due course, thanking Marcus for her “excellent service” during “difficult periods”.

In the last two years, she has turned down pay rises, underscoring her commitment to reducing the yawning gap between the haves and have-nots in what remains one of the world’s most unequal societies.

Analysts said MPC members Daniel Mminele, who has served as a deputy governor for more than 5 years, and Lesetja Kganyago, previously director general at the National Treasury, were the most likely successors.

RATES ON HOLD - FOR NOW

The bank left interest rates unchanged, as expected, saying the economic growth outlook had deteriorated while inflation had probably already peaked in the second quarter, hitting 6.6 percent in May.

It cut its growth forecast for the three years to 2016 further and said platinum production would continue to perform below potential until the end of the year, suffering the lingering effects of a devastating five-month strike.

The mining sector, now in recession, helped to drag the economy into contraction in the first quarter.

The decision to leave rates unchanged will be a relief to consumers worried about debt and job prospects in a country where one in four people are without work.

Rising consumer prices are also a worry, with the weak rand adding to imported costs.

Marcus reiterated the bank was still in a hiking cycle but stressed any moves would be highly dependent on data.

Two thirds of economists polled by Reuters had predicted rates would remain on hold, but the median forecast suggests a rise to 6.0 percent in November.

The bank has hiked rates by 75 basis points since January, trying to stem inflationary pressures. (Editing by Louise Ireland)

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