Old Guard Recalled To Action

South Africa's flailing government calls on old hands to right the ship.

Tito Mboweni brings a reputation as a strong professional to the job.

The unenviable job of restoring business and investor confidence to a battered South Africa has fallen to Tito Mboweni, the former Reserve Bank governor who was named finance minister by President Cyril Ramaphosa last month.

Africa’s most sophisticated economy is struggling to regain a reputation for good government following controversy over “state capture” of the Finance Ministry and other parts of the government by the wealthy industrialist Gupta family—a scandal that led to the resignation of former President Jacob Zuma early this year.

Mboweni, who served for the decade to November 2009 as central bank chief, is viewed in the financial community as a solid professional. “There is widespread investor confidence that he is well qualified for the position,” says Ben Payton, head of Africa investment analysis at Verisk Maplecroft.

But he may not have a lot of room to maneuver. Many economists argue that South Africa’s longstanding fiscal deficit prevents spending its way out of recession. Statistics South Africa reported in September that GDP had declined 0.7% in the second quarter, following a 2.6% tumble in the first. Moody’s cut South Africa’s growth outlook for 2018 to 0.5%, and sees better but still meager 1.3% growth for 2019.

“The biggest concerns are low economic growth and the diminished effectiveness of the South African Revenue Service,” says Gerrit van Rooyen, an economist at NKC African Economics. “[But] the market has a lot of confidence in Mboweni because of his successful tenure as the Reserve Bank governor.”

Van Rooyen cautions that “there are no quick fixes or low-hanging fruit that will get the South African economy back to consistently robust growth. The focus should be to address the structural impediments.”

Many expect his term to be short-lived. “Mboweni previously signaled that he wanted to step back from frontline politics,” notes Payton. “It would be unsurprising if he proves to be a stopgap appointment.” Mboweni himself has joked that he was “bullied” into accepting the appointment.