Because a 50% or 60% [debt to GDP ratio] is not such a bad figure if the composition of expenditure is such that the bulk of it is an investment rather than in consumption, says Nhlanhla Nene.
Less than two weeks after he hinted that change was coming, President Cyril Ramaphosa made sweeping changes to his cabinet, including the return of Nhlanhla Nene as the finance minister.
Other major changes to key economic portfolios include the appointment of Pravin Gordhan to the ministry of public enterprises to replace Lynne Brown; the appointment of ANC chairperson, Gwede Mantashe to replace Mosebenzi Zwane at mineral resources and the choice of Jeff Radebe to replace David Mahlobo as the minister of energy.
Zweli Mkhize, the former treasurer of the ANC, and one of the names that had been tipped as a possible finance minister will replace Des van Rooyen as the minister of Cooperative Governance and Traditional Affairs
The overhaul did not however touch the economic development, trade and industry or small business portfolios – with Ebrahim Patel, Rob Davies and Lindiwe Zulu all remaining in their respective jobs.
Nene’s return to the finance ministry is expected to be warmly welcomed by both political and economic observers. Several reshuffles in Zuma’s cabinet caused major policy uncertainty, but none more so than the changes made to the finance portfolio – which saw the currency yo-yo and the credit ratings downgrade ensue.
Nene was a well respected minister following his appointment in 2014. He cut his teeth in Parliament’s standing committee on finance, and served as a deputy minister under Pravin Gordhan.
But in late 2015 he was unceremoniously removed from the job by former president Jacob Zuma and replaced by the then, little known ANC backbencher Des van Rooyen. The move tanked the rand and caused an outcry among business leaders.
Zuma was forced to backtrack and replace Van Rooyen with Gordhan just days after ousting Nene.
At the time it was reported that Nene’s exit was due to his attempts to prevent a financial crisis at South African Airways, during which he locked horns with its former chairperson and Zuma ally, Dudu Myeni. His apparent resistance to a costly and controversial nuclear deal was also believed to be another key reason Zuma axed him.
With a record of supporting fiscal discipline and technocratic expertise Nene’s return could be a shot in the arm for much needed business confidence. His appointment also comes as ratings agency Moody’s is due to make a decision on whether to downgrade South Africa’s local currency rating – which hangs one notch above junk.
Nene replaces Malusi Gigaba, who returns to his previous portfolio of home affairs. Despite delivering what was seen as a very tough but pragmatic budget last week, Gigaba could not shake questions over his credibility. Gigaba’s political star rose notably during his tenure as public enterprises minister, where he made major changes to boards of key state owned enterprises (SOEs) – many of whom were associates of the controversial Gupta family. Critics have argued that he laid the groundwork for state capture.
Nene will be deputised by Mondli Gungubele – an ANC MP and former mayor of Ekurhuleni. Gungubele famously spoke out last year, saying he would vote with his conscience, rather than support Zuma in a vote of no confidence against him in Parliament.
Pravin Gordhan will replace Lynne Brown at the department of public enterprises. This is likely to be seen as another positive move given Gordhan’s time heading up the finance portfolio. He has been a vocal crusader in the fight against state capture and many parastatals are at the centre of graft claims.
After he was axed as finance minister, along with his former deputy Mcebisi Jonas, in early 2017, Gordhan moved to Parliament to serve on the portfolio committee on public enterprises. The committee has been running an inquiry into state capture at Eskom – where details of corruption have routinely surfaced.
Brown meanwhile has been widely criticised in the role, after the collapse of governance at important SOEs has plunged a number into financial crises. Eskom, one such example, was struck by a major liquidity crisis recently, after funders refused to lend to the company following a qualified audit last year.
Mantashe’s appointment at mineral resources has served to remove the controversial Zwane. He has been linked to the Vrede dairy scandal – currently being investigated by the Hawks. He also reportedly flew to Switzerland with the Guptas to help negotiate their purchase of a coal mine from resources giant Glencore. Last week the mine – Optimum Coal, which supplies coal to Eskom – filed for business rescue.
Zwane has also been at loggerheads with the mining industry after the introduction of a new mining charter last year. Relations have been at an all time low, with the industry resorting to taking the charter to court on review.
This action was suspended however after Ramaphosa became president and re-opened discussions between mining houses and government last week. The move effectively sidelined Zwane, an early indication that he was headed out the door.