New Finance Minister for South Africa - October 2018
President Cyril Ramaphosa has appointed former South African Reserve Bank (SARB) governor, Tito Mboweni, as South Africa’s new Minister of Finance. The change comes after former Finance Minister Nhlanhla Nene’s testimony before the Zondo Commission on State Capture, where he revealed he had had more frequent contact with the Gupta family than was previously suggested.
However, importantly, it also revealed that in 2015 Nene had resolutely, and amidst much opposition, safeguarded South Africa’s fiscal position by refusing to sign documents that would have committed South Africa to an unaffordable nuclear agreement with Russia. He was fired for this by then-president Jacob Zuma.
The circumstances under which Nene has been replaced are complex, and the decision would have been a difficult one for President Ramaphosa. However, Nene’s request over the weekend to be ‘released’ from his duties makes his replacement easier than an out-of-hand dismissal. Importantly, President Ramaphosa emphasised that he has not been found guilty of any wrong doing. This has a number of implications:
- It recognises the services rendered by Nene, and President Ramaphosa took time to acknowledge his contribution;
- It sets a high bar for other ministers who are known to have closer associations with the Guptas to be allowed to remain in office; and
- It removes the National Treasury and the associated minister from a high level of scrutiny, which would have undoubtedly been a detractor should he have remained in his office. This would have been material given the current tough economic situation and the crucial need for policy clarity. Therefore, it was imperative that the President appoint someone with experience and credibility in a public position.
Minister Mboweni certainly brings this credibility to the role, having been a well-respected leader of the SARB from 1999 to 2009, under then-president Mbeki. During this time, he navigated a number of economic crises, was an active advocate of inflation targeting and successfully managed the central bank’s transition to mandated inflation-targeting.
Prior to this, Minister Mboweni served as Minister of Labour from 1994 to 1998, under then-president Mandela, which speaks well of his relationship with the trade unions - a valuable position given the importance of managing government’s wage cost in ensuring fiscal sustainability.
For the past decade Minister Mboweni has been in the private sector, mostly consulting to various financial institutions. During this time, he has remained an active member of the ANC and is a popular member of the National Executive Committee, which suggests he should bring considerable internal support to his new role.
While not a technocrat, Minister Mboweni was a conservative central bank governor, and we expect this to reflect in support of ongoing fiscal consolidation given South Africa’s precarious fiscal position. He is likely to have a close relationship with current SARB governor, Lesetja Kganyago, having served in the same capacity when he was at National Treasury. The new Minister has always been outspoken in his opinions, with a strength of character that may be necessary to achieve the complex and often difficult balancing act the National Treasury is required to maintain.
We think the Minister may well have to respond to media and the scrutiny of a number of social media messages posted publicly over time, but we do not think this will detract from his commitment to the President nor to the fiscal stability for which National Treasury is responsible. We believe he will show great commitment to his new role, starting off with the presentation of the Medium Term Budget Policy Statement in a mere two weeks.
Good luck Minister Mboweni!