Chief economist of Citigroup in South Africa Jean Mercier says foreigners see more political risk in South Africa now than they have over the past few years, and will be keenly monitoring any “new faces”, especially in the key finance and Reserve Bank positions, as these people may be untested at high-level economic decision-making.
He also emphasises that the international and local business community would prefer to see more deliberation on key economic issues — like inflation-targeting — rather than just a top-down approach.
“There is probably more of a risk than over the past few years because we have had a situation where policy continuity was the order of the day — but it did coincide with a fairly long tenure of office of several policymakers, or politicians, who were in charge of the key levers of fiscal and monetary policy,” he told I-Net Bridge in an interview.
“From 2009 we will probably have a Cabinet that includes new faces. A decision will have to be made on whether to extend the mandate of Tito Mboweni as Governor of the Reserve Bank and on [Finance Minister] Trevor Manuel — it might be at the end of the day of what he [Manuel] wants to do. But I would say just because there will be new faces, some of them are untested at high levels of economic decision-making or policy making, and probably there will be some question marks raised by foreign investors and foreign businesses,” he noted.
“Another issue is one of the criticisms addressed to the Mbeki administration, that it was very much top-down decision making — we decide, you implement.
“And one of the requests of the African National Congress really is to have a much more open debate about issues. So even if the policy is not changed, it will be discussed,” he says.
“For instance, inflation targeting — we might not end up having a change, we may end up keeping the inflation target, especially if in a year from now the inflation is in target and interest rates are cutting; it takes much of the heat out of the debate.
“But it will be debated, it will be discussed, you see, and just the single fact there may be quotes in the media that this person is saying this and that person is saying that, people will just feel there is more of a certainty factor,” he concluded. — I-Net Bridge