Political turmoil ‘not helping rand’ - Sarb governor

Cape Town - Political turmoil stemming from the dispute between Finance Minister Pravin Gordhan and the Hawks creating uncertainty, which “isn’t helping the rand,” South African Reserve Bank (Sarb) Governor Lesetja Kganyago said.

The central bank is concerned that heightened rand volatility will feed into inflation, Kganyago said in an interview televised by CNBC Africa on Thursday. While the bank hasn’t changed its inflation forecasts since the last Monetary Policy Committee meeting in July, it remains concerned about the potential for price increases, he said.

“The Reserve Bank is facing a dilemma of low growth and inflation that is still elevated,” Kganyago said. “The monetary policy stance is still accommodating” though the central bank remained worried about inflation, he said.

The rand gained 0.5% on Friday to R14.59/$ at 06:30, paring losses of 8.5% in the last nine days of August after the Hawks told Gordhan to report to their office ahead of possible charge relating to alleged irregularities at the tax authority, which he headed from 1999 to 2009.

‘Pause button’

The consumer inflation rate slowed to 6% in July, at the upper limit of the Reserve Bank’s 3% to 6% target range, after it increased its policy rate three times in the past year to 7%. The central bank forecasts the economy won’t expand this year.

A rate increase by the US Federal Reserve would cause a repricing of South African assets including the rand, which could fuel further price rises, Kganyago said. While the central bank has “pressed the pause button” on rate increases, forecasting growth in the current environment is “risky” and speculation about possible rate cuts is without foundation, he said.

Asked about reports of ruling party politicians taking aim at the Reserve Bank, Kganyago said he had no concerns about the central bank’s independence, which is guaranteed in the constitution.

State capture fears grow as Zuma sycophants eye Sarb

Mineral Resources Minister Mosebenzi Zwane has suggested to the Cabinet that it withdraw the central bank’s authority to license banks and make it the responsibility of the finance minister, Business Day newspaper reported on Wednesday.

ANC deputy secretary general Jessie Duarte’s said earlier this week that the Reserve Bank should cushion the rand and the fact that it’s privately owned is a “difficulty.”

The comments heighten concern that some members of the ruling African National Congress are seeking to curb the independence of South Africa’s top state financial institutions.

The ANC may adopt more populist policies after its worst election performance since Nelson Mandela led the party to power in 1994, Fitch Ratings said after an August 3 local government vote.

'Next steps of control'

“These comments are the next step in trying to get control of everything, including the banks,” said head of Citadel Investments Services George Herman. “As soon as they can replace Mr Gordhan with a more ‘compliant’ minister, they’ll have free rein of the park.”

“This is another play at state capture and Zwane is a Zuma sycophant,” said Bayhill Capital MD Geoff Blount. “What it does reflect is the internal war in the ANC.”

The attacks on the bank show that politicians and government officials are looking for someone to blame for the failure of their policies, said Efficient Group economist Dawie Roodt.

“I don’t think in the short term the Reserve Bank’s independence is at risk,” Roodt said by phone. “They are trying to find a scapegoat somewhere.”