Trevor Manuel talks to Madeleine Wackernagel about the successful European roadshow and his optimism about our economic prospects
Five European cities in as many days is “hell on the body, but great for the country”, says Finance Minister Trevor Manuel, citing the DM500-million Eurobond issue as evidence of a successful tour. Now he has to win over the United States — and specifically the pension funds with $6- trillion under management.
“It’ll be interesting,” he says, “to see if we can prise loose the funds only a month before the presidential election. But the deputy president’s trip was well received — a nice foretaste of what we can expect next month.”
Manuel and Dr Chris Stals, governor of the Reserve Bank, went to Europe to get back into the Deutschemark market and set a new benchmark with a longer maturity profile, as part of South Africa’s debt management strategy. They left with an objective — DM450-million, five to seven years; what they got is DM500-million with seven years’ maturity, at 140 basis points over the Bund rate, or 110 over Libor.
“The Germans generally go for government stock but they don’t quite go for seven years; they like to come in shorter, so by all accounts it’s very favourable.”
The ride wasn’t all smooth, though. “There were some pretty hostile questions from fund managers in London, about affirmative action and government contracts,” says Manuel. “The question of crime is something you must expect when talking to foreign investors, but it was the way it was pitched that left a bad taste.
“Other than that, though, we were well received — as evidenced by the take-up on the bond issue.”
Manuel is confident about prospects for next month’s roadshow in the US, although the timing may be a bit awkward. So why go a month before the elections? “We’re doing it back-to-back with the International Monetary Fund (IMF) summit; I don’t like to be away too often.”
Certainly, judging by the number of times our interview was postponed, he is keeping very busy. But the investment community and the public at large remain sceptical about his performance.
Much is made of the poor reception he apparently received in London and Washington earlier this year, and his now infamous dismissal of the markets as “amorphous” is dug up time and again. Siding with the All Blacks against the Springboks brought him more flak.
He is philosophical: “When Marius Daling [of Sanlam] made the same remark [about markets] at the recent National African Federated Chamber of Commerce and Industry conference, the media did not react — and it wasn’t said tongue-in-cheek, nor is he the only one to have said it. Are the media fair? You tell me. But I’m not going to whinge.”
Criticism of his performance abroad is also shrugged off. “Our objectives on that occasion were very different. Some fund managers felt left out, but we were there to talk to central bankers, Michel Camdessus of the IMF, and others. We have to evaluate the success of the trip against the objectives we set ourselves. That was not a roadshow, this latest trip was, and it must be seen in a different light.”
There is a sense of frustration, though: “Everyone keeps asking me about privatisation and pushing for a time-frame. Another favourite is exchange controls. We are doing something, but cautiously. You can’t lift controls one day and then change your mind — so you’d better get it right.”
He points to the significant steps already taken, including raising the offshore investment limit for institutions to 10%. “You could then say, what about the other 90%, or you could take the view, along with Britain and the US, that it is a prudent requirement that institutions should hold 90% of the public’s savings in that country.
“There is a perception that we stand out like a sore thumb with all manner of controls, that we’re not moving on the issue. From March 13 last year, when the currency unified, to the end of June this year [when the 10% offshore investment limit was introduced], we’ve taken very big steps.
“But that our reserve position were different. But that we had 12 weeks of cover to provide a sufficient buffer. Then we could afford to be much bolder. We only have one shot.”
The same cautious, cerebral approach applies to privatisation. New Zealand had 12 years to implement its sell-off plans — we don’t have the same luxury of time, says Manuel. “But we’re getting there: the appointment of HSBC as adviser is only the first step.”
For all the lambasting he has received this year, Manuel is quietly confident that the economy is on track to achieve the targets laid out in the macro-economic strategy unveiled in June.
“A flash-in-the-pan growth rate of 6% is not enough; we need a policy alignment to make it stick and that’s what we’re working on.”
Does South Africa have the wherewithal? Fiscal policy is on track — “we will meet the 3% Budget deficit target” — and he has few concerns over monetary policy. Indeed, he was impressed with Stals’s performance: “There was a lot of pressure on him — not political, mind — to raise interest rates, but he resisted. Rate changes are the governor’s call — he informs me of his decision before the event but that is all.”
Macro-economic policy is not just about interest rates, though. On the trade front, “we’re seeing some lags shorten”, and investment is “not unimpressive”. And the new vigour to the Competition Board, witness its decision to block the cement merger, gets a special mention.
A queue of impatient officials is forming outside the minister’s door as we touch on the subject of the unions and the potential for conflict: “What we need is bigger than individuals. The government can’t expect everybody to become lapdogs that are stroked into submission.
“We can’t get into fist-fights with Sam Shilowa [head of the Confederation of South African Trade Unions] or anyone else. There are vested interests on all sides, including business; government must listen, but not become a passive broker.
“We have to build understanding,” he says, presumably hoping his critics will take note.