Mboweni's appointment seen as positive for SA economy

South Africa’s sixth finance minister in the last five years was appointed last month when former SA Reserve Bank (SARB) Governor Tito Mboweni was sworn in. This followed President Cyril Ramaphosa’s acceptance of Nhlanhla Nene’s request to step down.

SA's Minister of Finance, Tito Mboweni

Citadel Director and Chief Investment Officer George Herman believes that Nene deserves enormous respect for taking this decision after failing to disclose private meetings with the controversial Gupta family.

“Whatever one’s personal opinion of him may be, he should be applauded as the first South African politician to have apologised and fallen on his sword for having played a role in State Capture, without having been found guilty of any transgressions in a court of law,” he says.

Political cleansing

“Furthermore, the fact that President Ramaphosa specifically cited governance as his reason for accepting the resignation represents a huge step forward in his administration’s fight against corruption. This may go down in history as the beginning of South Africa’s political cleansing, and hopefully Nene’s example will encourage other implicated politicians to do the same.”

His appointment was somewhat of a surprise

Mboweni’s appointment has been seen as very favourable for the South African market, boosting confidence both locally and abroad – although it was, for many, unexpected.

“His appointment was somewhat of a surprise given that he had taken himself out of the running when the post was vacant in February, advocating for more of an advisory role,” says Nema Ramkhelawan-Bhana of RMB Global Markets Research.

She adds that Mboweni’s selection is considered a strategic one, “given that he has been removed from the executive for many years, sheltering him from political divisiveness both within the ANC and the government”.

Analysts at Barclays Global Economic Research see the appointment as constructive, given their view that “the country needs to implement what could be rather painful macro reforms in education, labour, the public sector, SOEs, infrastructure and energy to reverse the structural damage that many years of active apartheid policy and post-apartheid policy paralysis have wreaked on the country”.

They believe that Mboweni is in a good position to lead such a reform programme, given his demonstrated ability “to hold the line where it matters, together with his technical skill set”.

Overwhelmingly positive appointment

CEO of Cannon Asset Managers, Dr Adrian Saville, also welcomes Mboweni’s appointment.

“It comes at a time when South Africa needs to restore domestic investor confidence and assure foreign investors of economic stability, after a decade of directionless growth and increasingly compromised institutional capacity under the Zuma administration.”

He adds that President Cyril Ramaphosa has gone a long way already in getting the country onto a higher path and “although the circumstances surrounding Nhlanhla Nene’s being replaced are unfortunate, the appointment of Tito Mboweni as Minister of Finance is overwhelmingly positive.”

Mboweni was part of the so-called 'TM TRIUMVIRATE'

Saville points out that Mboweni was part of the so-called ‘TM Triumvirate’ – along with former president Thabo Mbeki and former finance minister Trevor Manuel – that oversaw the ‘Mbeki Miracle’ of “a period of rapid growth, low inflation and rising prosperity that South Africa enjoyed over most of the noughties decade”.

NWU economist Professor Raymond Parsons is also optimistic about Mboweni’s appointment as he sees it as “a confidence-building and reassuring step for the economy”. “

The latest change at the top of the National Treasury comes especially at a time when policy uncertainty remains in negative territory and when plans, policies and new initiatives to promote economic recovery and reform need high credibility,” Parsons says. “Reducing policy uncertainty and boosting investor confidence are still high priorities.”

Tendencies towards outspokenness

But the question remains: What about Mboweni’s tendencies towards outspokenness?

“This has caused him problems in the past – when at the SARB – for things he has said to journalists on the record that should not have been; in one famous case about what would happen at an MPC meeting the following week,” says Peter Attard Montalto, Head of Capital Markets Research at Intellidex.

“He has already – from his interactions with investors in recent years and his active Twitter posts – shifted quite far to the left on issues like mine ownership (advocating that the state should have 40% stake in all mines in one tweet), a sovereign wealth fund, a state bank and radical economic transformation,” Attard Montalto adds.

“As such we are cautious for now on exactly what role he will take on macroeconomic policy – whatever it will be, will be forceful and public, but National Treasury staff may well be able to ‘wrestle’ him back to a more orthodox view.”