Who is Tito Mboweni?

Who is Tito Mboweni and what it means for the USD/ZAR?

Tito Titus Mboweni was sworn in as the new South African Finance Minister on the 9th October 2018, taking over from Nhlanhla Nene, who publicly announced that he visited the controversial Gupta family on several occasions.

The markets seemed to favour the change, with the USD/ZAR depreciating about 2% after the announcement due to a stronger Rand. Markets will be watching and waiting for Tito’s next public appearance on the 24th of October when he is due to present the Medium-Term Budget Policy Statement (MTBPS).

The MTBPS denotes how government plans to spend and collect tax revenues, it includes any taxation and policy revisions that may be required, and outlines steps taken to increase growth for the next financial year.

Our new Finance Minister has his work set out for him, as South Africa recently entered into a technical recession with a large current account deficit and unemployment levels at record highs. It won’t help that the U.S is currently hiking rates which puts pressure on emerging markets like South Africa to increase interest rates to remain attractive to foreign investment.

Fortunately, the Finance Minister has an impressive track record within the financial and political realm.

  • The Finance Minister achieved his bachelor’s degree in economics and political science in 1985 in Lesotho and in 1967 he completed his master’s in development economics in England.
  • He was appointed as South Africa’s Minister of Labour from 1994-1998.
  • Most importantly he was the Governor of the SARB (South African Reserve Bank) for 10 years from 1999-2009.
  • He has also acted on various boards, including Discovery where he recently stepped down as a non-executive director after being appointed to finance minister.

The new finance minister has no deficit of education or experience in the realm of finance or politics, so this should be a win for South Africa and the Rand, right?

Some investors are concerned with the Finance Minister’s views on land expropriation, a topic which causes investors sleepless nights due to its possible deterioration of property rights.

The Finance Minister’s Job:

The finance minister’s main jobs are to manage the finance of government affairs, develop economic policy and to be responsible for the South African Revenue Service (SARS).

South Africa is an ailing economy that saw two quarters of negative growth in 2018. The biggest obstacles he faces is running the fiscus in such a way that he can:

  1. Increase economic growth.
  2. Decrease unemployment.
  3. Re-establish confidence from rating agencies.
  4. Re-establish trust in SARS post the Zuma era.

These are only a few of many pressing issues South Africa faces. Tito Mboweni’s first step to solving these problems would be to deliver a reasonable mini-budget which outlines how the state plans to use tax revenues effectively. The MTBPS may also give investors some more insight into President Cyril Ramaphosa’s fiscal stimulus package.

After the MTBPS our new Finance Minister will have to lean his focus to the State-Owned Enterprises and the Public Investment Corporation which have been under scrutiny for mis-management. The graph above shows the USD/ZAR under different finance ministers going back to 2010. The small blip in 2016 was when former President Jacob Zuma fired Nene and replaced him with Des Van Rooyen who stayed in the position for 4 days.

USD/ZAR under different finance ministers

SA minister chart

The new finance minister cannot make South Africa great by himself, but could he turn the country around with the help of its new president and cabinet?

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

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