Let me begin by saying WHAT A WEEK! When former finance minister, Nhlanhla Nene gave his testimony before the Zondo commission of inquiry last week no one expected that his testimony would lead to the opening of a Pandora box and the fall of one South Africa’s most “credible” public servants. Nene misled the nation when he lied about having met the Gupta family at their Saxonworld compound in a number of formal meetings. This after he stated in an interview with ENCA that he only met them during several government occasions and never formally had a meeting with the Guptas. Nene admitted that he met the Guptas at least seven times starting from 2009 when he was the Deputy Minister of Finance. While the reasons for the meetings and the details of what was discussed remain unknown and subject to further investigations, the revelations of the past week have exposed the deep end level of state capture and the Gupta-Zuma complex that has defined the last decade!
Given the loss of credibility, I share the public sentiment that it was correct for Nene to resign as the head of the National Treasury. The public should commend Nene for resigning for a serious “error in judgement”. More so since our economy finds itself in the worst condition since the 2008 financial crises and with two weeks to that all important medium term budget speech, the focus on Nenegate, as Nene himself said, would have continued to distract us from focusing our attention on our dire economic state. The credibility of the finance minister is essential in building investor confidence in the government’s ability to efficiently manage South Africa’s macroeconomic environment and to grow the economy.
However, state capture has been synonymous with former president Jacob Zuma and his circle of corrupt allies in the public and private spheres. It involves a wider audience of culprits including within the ruling party, the ANC in varying degrees of complicity in the mass theft of state coffers. Moreover, for Ramaphosa, Nenegate casts a cloud over the “new dawn” as one of his golden tools to bring about confidence in the South African economy. Ramaphosa’s reaction and choice in a new finance minister tells us a lot about Ramaphosa’s reflex quality and it is here that we must now turn our attention too.
The appointment of former South Africa Reserve Bank Governor Tito Mboweni, ( Aka “Mr Sha Sha”) according to Cassper Nyovest comes after rumours were touted about that either the member of the executive council of Gauteng, Barbara Creecy or Minister of Co-operative governance Zweli Mkhize or the current Governor of the Reserve Bank Lesetja Kganyago were possible candidates to take over from Nene. No doubt this would be a good pool to choose from. Alas, the times call for a steady and known iron fist in the form of Mboweni. South Africa’s 10th finance minister since the turn of democracy has a well-documented history with the South African economy, having served as a Labour minister in President Nelson Mandela’s administration and as the first black Governor of the Reserve bank for 10 years under the leadership of President Thabo Mbeki. Mboweni’s stint as the monetary policy chief presented a sense of predictability in how government should approach South Africa’s economic challenges and problems. Mboweni made up one-thirds of the economic trio that was at the helm of South Africa’s macroeconomic management, Pravin Gordhan as the Commissioner of the South African Revenue Services (SARS), Trevor Manual as the Minister of Finance and Mboweni as the head of the SARB.
During this golden period of five to six percent economic growth, South Africa’s price stability was governed by the idea of inflation targeting of between three percent to six percent by the SARB under the leadership of Mboweni and fiscal prudence that would see the government cap spending according to its resources, while cutting back public debt. In many ways South Africa achieved that with sound fiscal health that saw debt fall from 50 percent of Gross Domestic Product (GDP) to 27 percent of GDP. Mboweni’s use of interest rates to ensure price stability and exchange rate stability was critical in ensuring volatility was mostly kept within margin, ensuring South Africa was insulated by external shocks and could leverage the commodity boom of the early 2000s. Nonetheless, even with this record South African unemployment remained stubbornly high and inequality grew under the Mbeki administration.
Given this context, I expect the hangover of GEAR to permeate the Ramaphosa years. Government will seek to project the message of a government that is fiscally prudent and one that will use fiscal expenditure to stimulate economic growth, while ensuring government debt is kept within the budget ceiling. However, the question still remains, how will Mboweni manage stimulating growth given the limited room to manoeuvre? The debates around austerity verses stimulus remain entrenched and the lack of government clarity on this continues to present policy uncertainty. There is also the greater conversation that we are not having; while the finance minister is a key component in South African macroeconomic management, why are we not talking about South Africa’s industrialization, trade, foreign economic, economic development polices. While it is Mboweni who will determine the allocation of budget, it is the other economic cluster ministries that will determine how this budget will be implemented with regard to the economy. However, whenever conversations have occurred on the SA economy too much attention is placed on the finance minister and too little attention is given to what Minister of Trade and industry Rob Davies, Minister of economic development Ebrahim Patel or even Minister of International Relations Lindiwe Sisulu are doing in order help South Africa get its economic fundamentals right.
My hope is that Mboweni given his senior government experience, private sector experience and his political clout within the ANC as a member of the ANC’s National Executive Committee (NEC) will be able to drive these conversations and assist Ramaphosa’s government short and long term responses to the structural impediments rooted inside the South African economy. For now let us be happy that we have a steady hand at the helm and while conversations around introducing a younger generation within senior leadership of government is an important one, for now we needed a person whom we didn’t need to look up on Wikipedia but whom the markets and the South African people know. So well done Ramaphosa on your choice of Mr Sha Sha!