The musical chairs at the South African finance ministry continue as Nhlanhla Nene finds himself out and Tito Mboweni finds himself in. But can the flamboyant, and controversial former governor of the Reserve Bank pull the country out of the economic quicksand it is currently mired in? Mushtak Parker reports.
His predecessor Nhlanhla Nene was famously dull – albeit seen as a figure of stability, which was one of the reasons why the banking industry and financial markets liked him. But when South African President Cyril Ramaphosa announced the appointment of Tito Mboweni as the country’s new Finance Minister with immediate effect on 9 October, following Nene’s untimely resignation, the contrast could not have been starker.
In the space of a mere nine months, the incumbent at the National Treasury in Pretoria has been changed from a boring technocrat to a social media sensation, especially on Twitter, where Mboweni’s trending reached rock star status. It almost seemed that Mboweni was tempting fate about a pending elevation, when he tweeted in September – “Maybe time to say goodbye”. The idiosyncrasies do not end there. Which other finance minister can claim to have a hit record named after him? When that Messiah of Mammon, rapper Cassper Nyovest, launched the track Tito Mboweni in 2017, the music video of the hit single got 2m views on YouTube in two months. That track resurfaced last month and went viral after Mboweni was named Finance Minister.
The British-educated Mboweni is also an aficionado of hot chillies, with a penchant for participating in chilli-eating contests – whether in Kenya, Rwanda or elsewhere. Perhaps it is no coincidence that he has landed perhaps in the hottest seat in South African politics – the National Treasury. The fifth Finance Minister in three years, his job is to steer the economy, which is technically in recession and where GDP growth has contracted for the first two quarters of 2018. The outlook remains fragile. The Treasury’s current forecast of a GDP growth rate of 1.5% for 2018 is woefully short of the 5% growth rate required to start making a dent in the 27% unemployment rate; or to meaningfully deliver on the wider promises successive ANC governments have made – ranging from rooting out cronyism and corruption, to providing more electrification in deprived areas and affordable housing.
Nhlanhla Nene’s fall from grace was precipitated when the ghosts of the Gupta family scandal returned to haunt him. He admitted to the Commission of Inquiry into State Capture in early October that he had, in his capacity as Finance Minister, visited the family several times at their residence. This contradicted earlier statements that he only met them at their business premises and at public events. This omission Nene confessed was “a mistake” and a matter of “poor judgement”, which he regretted. The Guptas are accused of capturing state funds with the collusion of the Zuma presidency. Given that his relationship with the Guptas was no secret during the Zuma presidency, his reappointment as President Ramaphosa’s first Finance Minister should have raised a few red flags. That it didn’t perhaps also exposes a lack of due diligence in favour of political expediency within the corpus of the ANC and the presidency of the day.
ANC’s economic brains
Mboweni’s career is entwined with his time as an ANC political exile and his being nurtured as the party’s economic brains. President Nelson Mandela appointed him Minister of Labour in the first ANC administration and President Thabo Mbeki subsequently appointed him as the first Black Governor of the South African Reserve Bank (SARB) in 1999.
When President Ramaphosa, in his appointment statement, stressed that “Mr Mboweni takes on this responsibility at a critical moment for our economy, as we intensify cooperation among all social partners to increase investment, accelerate growth and create jobs on a substantial scale,” he could not have overstated the challenge. Not that Mboweni is a natural supporter of his President. In fact, he supported Nkosazana Dlamini-Zuma, Ramaphosa’s rival, in the ANC leadership contest last December, and even stressed in the past that he would not serve in a Ramaphosa cabinet.
But the markets seem to like him, with the rand gaining 1% on the day his appointment was announced. Fitch Ratings, in its latest report on South Africa, warned that President Ramaphosa’s recent economic stimulus and recovery plan, aimed at driving growth, re-prioritising setting up an infrastructure fund, improving education and health, and investing in municipal social infrastructure, “is unlikely to deliver a significant boost to economic growth”.
In the financial sector, the response of banks to the impact of Expropriation without Compensation (EWC) land reforms if adopted, and to the reform of the State-owned enterprises (SOEs), has been unenthusiastic. “Banks,” explained Andrew Parkinson, a Director in Fitch’s Middle East & Africa Financial Institutions department, “remain very cautious in lending to SOEs. There remain some SOEs who banks will not finance without a federal government guarantee.” Given that Mboweni’s hands are effectively tied, both in terms of the poor growth dynamics and the demands of the ANC’s 2019 election strategy, his work in economic and fiscal management is effectively cut out. Not surprisingly, he has both his enemies and supporters in the morass that is South African politics.
The extreme-left Economic Freedom Fighters (EFF) have welcomed Mboweni’s appointment with a rejoinder that he “prioritises the interests of the people of South Africa, in particular the poor black South Africans who suffer poverty, unemployment and hunger.” The irony is that had it not been for the objections of some of Zuma’s leftist supporters, Mboweni could have been Finance Minister, a portfolio which he has long coveted, ahead of Nene. It is no secret that Cosatu and the SACP (South African Communist Party) had blamed Mboweni for government policies that they believed led to rising unemployment and growing inequality.
Similarly, the National Union of Metalworkers of South Africa (Numsa) denounced his appointment and called him an enemy of the working class. They referred to his tenure as governor of SARB, when he allegedly championed neo-liberal macro-economic policies which favoured the rich whites and the emergent black middle class, and led to massive job losses due to factory closures.
On the other hand, well-known economist Frans Cronje, who is also chief executive of the Institute of Race Relations (IRR), the independent think-tank that promotes political and economic freedom, says that the jury is still out on Mboweni’s appointment: “We are unsure given the minister’s propensity to make odd and often contradictory statements on the economy. We are especially concerned about his position on property rights and his seeming support for the idea of a state-owned bank, a state-owned mining company, and the financing of a sovereign wealth find via allowing the state a free carry interest in firms listed on the stock exchange.”
An intellectual challenge for Mboweni may be how he reconciles his socio-nationalist ideals and policies with his free market and private business instincts. After all he was an accomplished businessmen and even served as an Adviser to Goldman Sachs. This together with his tenure as SARB governor, stands him in good stead to engage with the banking sector with the hope that he persuades them to invest more in the economy, to generate that elusive growth and hopefully, meaningful employment.