The king is dead, long live the queen!

From Gary Booysen, Financial Editor...

Dear Money Morning Reader,

On Sunday, it was announced that Tito Mboweni would be stepping down as Governor of the Reserve Bank. Mboweni was initially appointed to lead the bank for a third term but, according to President Zuma, though he had "reappointed Mboweni... he indicated he wished to leave in November to pursue other interests". Markets have remained firm on the news, as experts across the board welcome the appointment of Gill Marcus.

But, who is this Gill Marcus?

She certainly is well qualified to pick up the reigns of power at our central bank. Having always been a staunch ANC supporter (and exiled for her beliefs in 1969), she was instructed in 1990 to return from exile in London, to set up the ANC’s information department. She was the chair on the joint standing committee on finance in parliament as well as a non-executive director of Goldfields. She was the Deputy Finance Minister from 1996 to 1999 and, more importantly, was the Deputy Governor of the Reserve Bank from 1999 to 2004. As such, she should be familiar with the central bank’s levers of power. She’s politically adept having served in parliament from 1994 to 1998. Most recently, she was the chairwoman of ABSA and, having successfully captained this monolithic bank through the beginnings of the recession, should prove a steady hand in guiding South Africa through the global recession.

The markets have clearly welcomed her appointment, but so have Cosatu and the SACP. They see her appointment as an opportunity to rehash the debate on inflation targeting. There’s no doubt Tito Mboweni was a hardliner, firmly believing inflation would stifle growth and hurt the poor far more in the long run than the benefit that could be achieved by dropping rates further. He was often at loggerheads with Cosatu. The Times reports him saying that he had hoped, by his "retirement", trade union members would be wearing T-shirts saying: "Viva inflation targeting, Viva!" He went on to say, "I have failed desperately”.

Despite being thought of as a strong person by Nick Binedell, her sometime colleague and dean of the Gordon Institute of Business Science (GIBS), Marcus will be put to the test by renewed union demands.

What does Gill think?

So far she’s been rather coy. In her appointment speech, she said: “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... [It’s] far too early to answer any questions of that nature. So I’m sure down the line we will have many debates.”
In the past, she’s seemed less inclined to worry about inflation. In November 2008, speaking as a member of a panel of academics, economists and politicians at GIBS, she said: “International deflation is becoming a problem.” Moneyweb’s, Felicity Duncan, reports that, “for Marcus, the current crisis is a one-in-a-hundred-year disaster in the proportions of the Great Depression, and it demands skilful, visionary leaders to lead humanity through it”.

Let’s hope the current crisis, which saw South Africa’s credit rating notched up from BAAA1 to A by Moody’s rating agency last week, doesn’t elicit an over Keynesian reaction from her. Stay strong Gill Marcus. Be a visionary leader and don’t throw our country to the wolves by dropping rates.

Until next week,

Gary Booysen

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Turning to the markets...

The JSE all share index slipped 1.05% yesterday. The gold mining index lost 1.2%. Resources fell 1.84%. Banks and financials slumped 0.47% and 0.28% respectively. Industrials slipped 0.77% and the platinum mining index grew 1.34%.

London's FTSE100 bounced 0.28%. The Dow Jones lost 0.39% and the Nasdaq gained 0.78%.

Tokyo's Nikkei climbed 0.96%. Hong Kong's Hang Seng jumped 2.33%.

Brent crude is currently trading at $67.44 per barrel.

Spot gold's trading at $953.10 and platinum was last quoted at $1178.50.

And here's how the rand is performing against the major currencies:
R/$ 7.68
R/₤ 12.68
R/€ 10.94