The arrival of Tito Mboweni, South Africa’s latest minister of finance, at the annual conference of the Association of Black Investment Professionals was met with an awed hush; the kind of silence reserved for those who both change history and form a fundamental part of it. His speech, however, was a triumph in humour and a rare insight into the challenges that face South Africa and the challenges he has inherited as the new finance minister.
“When Cyril Ramaphosa, our president, called me to ask if I would become the new finance minister I told him we need young people,” said Mboweni. “He told me that he wasn’t asking for my advice, he was asking me to take on the job. I was bullied into submission and I was grumpy about it. Then, he bullied me into coming here to talk about the role of the financial sector in South Africa’s economy.”
For Mboweni the answer to this question was simple: “You know this. You know your role. I believe that if we are really serious about access to capital to drive the economy we must think about how to support the small, medium and micro enterprise (SMME). In Germany, the economy is driven by the hidden champions, the SMMEs. While they depend on the larger enterprise for contracts to some extent, it is their agility and dynamism that drives things, and we need to focus on that.”
The question that Mboweni raises is a pertinent one. Where will the SMME get its money? And he replies by confessing that the government made a mistake in the 1990s when it engineered the demise of the Small Business Development Corporation (SBDC).
“It was a huge mistake. Trevor and I accept that responsibility,” he adds. “It was a concentrated vehicle to support the SMME and maybe now it is about time we went on our knees and re-engineered the SBDC.”
Mboweni did not shirk the hard questions and perhaps one of the most prevalent was the belief in the validity of a state-owned bank. He admitted that in the past this had been something he had supported, but today his view has changed.
“There is a concern that a state bank would just become another source for a heist,” says Mboweni. “My enthusiasm for this idea has subsided because of these heists. To fix our economy we need to sort out our financing and recognise that institutional investors are key. And the existing banks need to cross the Rubicon and recognise that we face a structurally different economy to the one we faced in the 1990s.”
Mboweni emphasised the importance of changing thinking, looking to renew commitment to sectors that require support and paying attention to how society has changed.
“The financial sector needs to think more about where the growth in the economy is going to come from, and which economy we are currently oiling,” concludes Mboweni. “There’s a major demographic shift where most of the population lies in urban or peri-urban areas, and we have to stop thinking the way we did in the 1940s and the 1950s. We are in a different society.”