Tito Mboweni has returned to the political and fiscal fold as finance minister in a move that was welcomed by business organisations and labour — and saw the rand steady after a volatile day.
Following the resignation of Nhlanhla Nene on Tuesday, President Cyril Ramaphosa announced that Mboweni — a former reserve bank governor and labour minister — would take up the mantle.
The currency — which had skated over the R15 to the dollar mark during the course of the day on speculation about Nene’s future — recovered to around R14.70 following Ramaphosa’s announcement. The yield on the benchmark ten year bond also steadied somewhat, reaching around 9.2%.
Mboweni’s appointment comes just two weeks ahead of the medium term budget policy statement (MTBPS). This year’s MTBPS has been seen as particularly pivotal as it is expected to flesh out Ramaphosa’s recently announced economic stimulus package. Mboweni also steps up to the plate as the country is caught in the grip of a technical recession and government finances are severely constrained.
Nevertheless, business organisations and economists alike have welcomed Mboweni’s appointment.
“This is a very good appointment for a number of reasons,” said professor Jannie Rossouw, the head of the school of economic and business sciences at the University of the Witwatersrand.
Key amongst them was the fact that Mboweni will be able to work with the National Treasury. “In many instances we have the problem that … ministers and their departments are in low-scale warfare with one another, and Mr Mboweni will be able to breach that divide,” Rossouw said.
Mboweni was highly respected and would be able to “restore stability and investor confidence,” he added.
He would also be able to work with the central bank as well as be able to reinforce the need for its independence. “While respecting the independence of the central bank, its very important that the minister, the treasury and the central bank work together,” said Rossouw.
The state is facing some hard financial decisions and there is a critical need to restructure government expenditure said Rossouw. “Mr Mboweni will be able to drive that,” he said, adding that among the tasks he faced was dealing with the government’s ailing state owned enterprises.
With Mboweni back in the political arena he would be able to build a political power base for himself, which a finance minister needed, Rossouw said.
This however had implications for the country’s succession he argued as Mboweni might “start thinking about being a successor to [president] Ramaphosa”.
Business organisations have also welcomed his appointment. In a statement Cas Coovadia, managing director of the Banking Association South Africa (BASA) welcomed Mboweni’s appointment saying that “he has the skills and experience to manage the fiscus and help the economy to recover, in these challenging times”.
“As a former labour minister, he will understand that addressing the challenges of unemployment, poverty and inequality, are as important as maintaining fiscal discipline and the stability of the financial system,” Coovadia said. “Minister Mboweni will have to focus on working with his colleagues to ensure a stable and coherent regulatory and policy environment, to give business confidence to invest in the real economy.”
Let the “Nene rule” apply
Nene resigned in the wake of his testimony to the Zondo commission of inquiry into state capture last week. He revealed that, counter to previous public assertions, he had met with the controversial Gupta family on several occasions during his previous terms as both deputy finance minister and finance minister.
Questions have also emerged over Nene’s role as the former chair of the Public Investment Corporation [PIC]. Last week the Mail & Guardian and the amaBhungane Centre for Investigative Journalism reported the role of Nene’s son in securing PIC funds for an investment into a Mozambican palm oil refinery.
Nene’s decision to resign should not be overlooked said Rossouw, and the “Nene rule” should be benchmark that is applied to all of cabinet. “I really respect that minister Nene tendered his resignation. I trust that this sets a new benchmark in cabinet, that minister’s tender resignations [when questionable conduct is revealed]”
Mboweni also received a cautionary nod from trade union federation Cosatu.
During his tenure as reserve bank governor Mboweni found himself in labour’s crosshairs over monetary policy.
But in a statement the federation wished Mboweni “all the best in his new position” and said that he “has our support as workers and we hope that he can provide the necessary leadership to kick-start our flailing economy”.