/ 12 October 2018

Move over, here comes Tito

President Cyril Ramaphosa congratulates newly appointed Finance Minister Tito Mboweni
President Cyril Ramaphosa congratulates newly appointed Finance Minister Tito Mboweni, who is expected to make his presence felt regarding economic strategy. (Sumaya Hisham/Reuters)

Intelligent, independent and arrogant. These are some of the words used in the corridors of power to describe the new finance minister, Tito Mboweni.

The outspoken former Reserve Bank governor made a spectacular return to government this week after President Cyril Ramaphosa accepted Nhlanhla Nene’s resignation as finance minister.

One of Mboweni’s priorities will be to turn around the treasury and make it the single driver of economic policy, according to Business Unity South Africa president Sipho Pityana, who was in exile with Mboweni in Lesotho and worked under him as the director general of the department of labour after 1994.

In an interview this week, Pityana said he strongly believed Mboweni would adopt a different approach to the previous finance ministers in managing the economy.

“My view is we are likely to see a treasury that reoccupies its rightful position at the centre of economic policy decisions. During the period of Pravin Gordhan, Malusi Gigaba and Nhlanhla Nene, the treasury was fighting for a place under the sun and there was a lot of hostility from other government departments. The centre of economic policy had shifted to no-man’s-land, particularly after Pravin’s term. “That would be the first major shift. Tito would want to make sure that everyone understands the structural role of treasury and the importance of having an economic centre in the state system.

“If the security centre in the state system ultimately is your defence, the economic centre is treasury. Once you don’t have treasury as your economic centre, the centre of your economic strategy and programme sit in no-man’s-land and that’s where confusion comes,” said Pityana.

It did not make sense to have the department of economic development, trade and industry and the treasury driving different economic policies, he said.

“I know he [Mboweni] feels strongly about this and he would want to persuade the president and other economic ministries. There are too many economic ministries. That’s part of the confusion. He will want to make sure that there is an alignment on what is the country’s economic strategy.”

Despite Mboweni’s tweets earlier this year, which included the call for the state to own 40% of all mines and to create a state-owned bank and a sovereign wealth fund, Pityana said he did not expect him to push a radical line. Instead, what is expected is something of a known quantity — a man of knowledge and acumen, with experience of financial markets, who understands the budgeting process, the pressures on the treasury and the importance of an independent Reserve Bank.

“Nationalisation [and other things] are positions that he never advanced when he was at the Reserve Bank. He belongs to the generation that persuaded the ANC that nationalisation is not a good idea, often referring to it as the ‘n’ word.

“We had a grouping that was called Merg [microeconomic restructuring group]. It was very left wing in its orientation and pushed strongly the agenda for state-owned [entities] and nationalisation. He [Mboweni] was among the first to break from the idea of that position and the overstated position about the role of the state. He always believed in a developmental state, which was different from state ownership of assets of the economy,” said Pityana.

During his years as Reserve Bank governor, Mboweni was known for his liking for formality and ceremony, which was epitomised by his well-cut suits. He was also known for holding the line on the Reserve Bank’s mandate on monetary policy.

It was for this reason that, towards the end of his term, in 2009, he found himself in the cross hairs of the ANC’s alliance partners. They wanted to abandon inflation targeting and to rewrite the central bank’s mandate to focus on economic growth and job creation. It was at a time when

Jacob Zuma’s new presidency was flush with the promise to labour allies of a more expansive economic policy.

Cosatu, despite its less than sunny history with Mboweni, has now offered him its “support as workers” and said it hoped “that he can provide the necessary leadership to kick-start our flailing economy”.

But this “conditional acceptance”, as political analyst Ralph Mathekga has put it, may be short-lived, particularly given that Ramaphosa, in his bid to unify the ANC and right the listing economy, needs to bring factions and interest groups together. Mboweni’s history with labour “is a big thing”, Mathekga argued.

The role of finance minister comes with the near-impossible task of balancing political populism and the wants of a bloated Cabinet with the need for financial prudence and a pragmatic approach to economic policy. These pressures are even more acute now. 

The economy is in recession, the budget is stretched and, with a debt level at about 50% of gross domestic product, ratings agencies have been calling for more fiscal conservatism.

Nene referred to the trade-offs facing the government, including how it will deal with the rising public-sector wage bill. These unpalatable choices now face Mboweni.

“He’s going to need a great deal of [political] protection from President Ramaphosa, protection that the president himself doesn’t have,” Mathekga said.

ANC national executive committee member Ngoako Ramatlhodi, who mentored Mboweni while he was at the then University of the North (now Limpopo) and during their exile years, said he was confident Mboweni would do a good job.

He revealed that, at first, Mboweni did not want take the job. “He was refusing to go [to become the finance minister], he told me. But they [ANC leaders] had to prevail upon him that we in the ANC are cadres. Even if it means losing income, sometimes you can be called to come serve the country. It shows you the calibre of a man that he is,” Ramatlhodi said.

He described Mboweni as one of the brilliant cadres of the ANC and as someone who would take good care of the public purse.

The ANC has adopted a resolution to nationalise the Reserve Bank, despite the likes of governor Lesetja Kganyago expressing serious misgivings about the necessity of such a move and the possible high cost to the government.

Mboweni famously clashed with activist shareholders who wanted the bank nationalised during his term, including German Michael Duerr, who attended one meeting in lederhosen. But there is some sympathy for Mboweni because he was dealing with people who were seen by some as playing to the press gallery.

The fight boiled down to what the value of the bank would be if its shareholders were bought out, and whether the value of the bank’s gold and foreign exchange reserves should be included when valuing the share price.

But analysts and economists believe Mboweni will steadfastly defend the bank’s independence.