Mboweni will have his work cut out
There is little doubt the rand loves the idea of Tito Mboweni as finance minister. It flirted with R15 to the dollar before President Cyril Ramaphosa’s announcement that Mboweni would be finance minister — the country’s third in less than a year — but settled in early morning trade the next day at a little over R14.50.
But the new finance minister’s tweets earlier this year have cast him in a less market-friendly light. According to his tweets in April, mooted reforms include the state owning 40% of all mining companies, opening a state bank, implementing appropriate land-use planning and creating a sovereign wealth fund.
But Alan Hirsch, the director of the Nelson Mandela School of Governance, said Mboweni had more urgent issues to attend to and it was unlikely those would be a priority for him.
“It’s obviously easier to be unorthodox when you are not in a position of responsibility than when you are in a position of authority, and that’s true for everyone,” Hirsch said.
The Democratic Alliance has called for Mboweni to explain his conversion to or flirtation with “radical economic transformation” before he presents his mid-term budget policy statement in two weeks’ time, or he will have to answer questions about them then.
In a statement, the DA’s spokesperson on finance, David Maynier, said, although the minister was widely welcomed by the markets, “he has been in political exile for nearly a decade and his views on the economy may not be as market-friendly as was first assumed”.
His views would have “major implications for investment and job creation in South Africa”, Maynier said.
Mboweni faces the mammoth task of steering the country out of a recession and the government has little fiscal room to manoeuvre.
Its public debt is at a historical high level of 53.1% to gross domestic product (GDP).
The International Monetary Fund, the World Bank and the Reserve Bank have revised South Africa’s GDP growth projections to 1% or lower for 2018.
At this stage, most of the recovery plans have been laid out. Ramaphosa has tabled an economic stimulus package, which calls for R50-billion of spending to be reprioritised, and a framework agreement projecting how the economy will stump up an additional 275 000 direct jobs annually has been signed by labour, business and government. An investment summit is scheduled for October 26.
Mboweni’s first task will be to deliver the mid-term budget. Given that it is just two weeks away, it is unlikely that the new finance minister will be able to reshape it at this late stage.
Nevertheless, he will have to convince markets and credit-rating agencies that Ramaphosa’s economic plans are achievable. Despite some positive changes in the boards and management of state-owned entities, many of them remain unprofitable and still pose a threat to the country’s fiscal outlook. This is particularly the case with Eskom, which has a debt of nearly R400-billion, of which about R270-billion is guaranteed by the government.
But it appears that Mboweni is inheriting a steadying power utility. Earlier this week, Public Enterprises Minister Pravin Gordhan told reporters at a Financial Times Africa Summit in London that Eskom had enough liquidity and would not need government bailouts for the next year.
This time last year, the parastatal had severe liquidity issues and was struggling to raise money on the bond market because of its corporate governance failings.
Eskom spokesperson Khulu Phasiwe said the entity had managed to raise enough money not to have to approach the government for more, and it was close to raising its funding requirement goal of R72-billion for the current financial year, and maybe even exceeding it.
But Phasiwe said Eskom needed to become more efficient and productive so that the government guarantees would not be called up. “The risk will be minimised if Eskom improves efficiencies and productivity levels, and ultimately the bottom line, and the state does not have to make any further guarantees or any bailouts,” he said.
Phasiwe said it was not considering voluntary severance packages, retrenchments or anything that had to do with trimming the headcount. The utility employs 48 000 people and has been described as grossly overstaffed. He said the utility was instead focusing on cutting costs in other areas.
Another challenge for Mboweni is the ever-growing public sector wage bill. A settlement with the unions could add an additional R30-billion in government spending over the next three years.
At last week’s jobs summit, Ramaphosa said one of the aims of the framework agreement, signed by the government, business, communities and labour, was to try to avoid job losses in all sectors while rising unemployment was being tackled.
The agreement also states that there will be no retrenchments in government.
Matthew Parks, the parliamentary co-ordinator of trade union federation Cosatu, said it had fond memories of Mboweni when he was minister of labour, as he had drafted some of the country’s key progressive labour laws.
Cosatu expects him to play a key role in managing the commitments to create employment and avoid state retrenchments, as laid out in the agreement.
“We have policies and commitments and which government don’t implement. We hope that, given his [Mboweni’s] political experience and nature, he would help to move things to sort of quickly and decisively,” said Parks.
Lumkile Mondi, a senior lecturer at the University of the Witwatersrand’s school of economics and business science, said Mboweni was not the kind of candidate who would grasp the fundamental problems of the economy; he was more likely to be seduced by populist views.
“He tweeted about it and I don’t see him changing around it. A person like him, when he tweets, it’s because he believes in what he is saying,” Mondi said.
Will Mboweni’s term just be transitional, to fill in while the ANC restructures and repositions itself?
“I think he misses the hurly-burly of politics. I think he enjoys it. I think that he probably would like to stick around for a while,” said Hirsch.
Mondi said, despite Mboweni’s extensive history in shaping monetary policy and experience in the financial sector, he had acquired baggage with his apparent switch from orthodoxy to the far left.
“Now that he is a chameleon, we measure him based on how chameleons behave — that he can’t be trusted. He changes colour depending on where the chameleon is lying. You need someone who has a view and is committed to that particular view,” said Mondi.
Tebogo Tshwane is an Adamela Trust business reporter at the Mail & Guardian