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Nhlanhla Nene is now the former South African Finance Minister (once again), after president Cyril Ramaphosa accepted Mr Nene’s decision to resign. Tito Mboweni, a former South African Reserve Bank (SARB) governor has now been sworn in as new finance minister.
Nhlanhla Nene’s resignation follows recent inquiries into state capture which revealed the former finance minister to have met with the controversial Gupta family (who are at the centre of state capture investigations) on multiple occasions, despite having told media previously that he had not. It is also been alleged that Mr Nene had breached the “code of ethics” while with the Public Investment Corporation (PIC), a matter which is to be investigated by the Public Protector. This is the second time that Mr Nene has failed to complete his full term as Finance Minister.
Tito Mboweni is a former Reserve Bank Governor and Labour Minister in South Africa, as well as an international advisor to Goldman Sachs international and non-executive director for South Africa at the BRICS (Brazil, Russia, India and South Africa) development bank.
The Rand Approves
The short term reaction to the change of guard, in terms of finance ministers, was one of approval by the rand which gained roughly 30c against the Euro and 20c against the dollar and British Pound, shortly after the news. The initial impression for the currency move, is that weakening into the event came from speculation that Nhlanhla Nene was to step down and the uncertainty around who his replacement would be. The rand strength which accompanied the Tito Mboweni appointment is suggestive of markets trusting the experienced businessman/finance person who will be looking after the states purse.
The Medium Term Budget Speech
In just two weeks’ time (24 October 2018), the new Finance Minister will deliver the Mid-Term Budget Speech. Mr Mboweni will need to stick to the knitting in terms of managing expenditure ceilings and reducing the deficit targets within the budget, whilst trying to revive economic growth within the country. The wiggle room for drastic economic change would appear very limited when considering only one rating agency (Moody’s) has maintained South Africa’s investment grade rating and will be keeping a watchful eye on the budget.