On balance, Mboweni did well

2009-11-07 13:45

TODAY Tito Mboweni is shedding his title as South Africa’s first black Reserve Bank Governor for good.

Tomorrow Gill Marcus will begin her tenure as chief of the country’s lender of last resort.

It is hard to imagine that Mboweni will be reduced to an ordinary citizen after enjoying the prestige and power of being governor for 10 years. He was at the apex of the banking industry, determining through tweaking the repo rate how much interest South Africans paid, and occasionally influencing the value of the rand by accumulating foreign reserves.

Views on his success differ. The ANC’s leftist alliance partners Cosatu and the SACP argue that he was a conservative governor who kept interest rates too high, thereby choking growth and job creation.

Cosatu, the main voice of the country’s working class, has a particular disdain for Mboweni. In June, it made it clear it would not support the renewal of his contract when it expired in August. Jacob Zuma, the man propelled to the Union Buildings against all odds by Cosatu and the SACP, obliged and told Mboweni his time was up.

Undoubtedly, Mboweni’s legacy is that his policies earned us credibility on the global stage. When the ANC took over the political reins in 1994, many outside South Africa, and the country’s fearful white minority, thought that a bunch of Marxists would nationalise and destroy the economy established on the mining of gold.

Mboweni’s political origins were tainted with communist rhetoric. As the labour minister in Nelson Mandela’s cabinet, he oversaw the introduction of the Labour Relations Act, the labour legislation which business to this day views as an enemy of free enterprise economics.

His views before the 1994 democratic elections and during the brief period he was labour minister were left-leaning. But that all changed when he was appointed the Reserve Bank governor in 1999.

His management of monetary policy was professional and rooted in independence, unfazed by rumblings from both labour and business about interest-rate decisions that went against their wishes. His new-found economicic stance, and that of former finance minister Trevor Manuel, earned him respect the world over, and allowed South Africa to punch above its weight in global economic and trade matters.

He was so uncompromising on the Reserve Bank’s independence that he once told a press conference that: “Not even the president (then Thabo Mbeki) knows the outcome of Monetary Policy Committee meetings. He gets the news when everyone does.”

Mboweni entered the Reserve Bank in 1999 at the tail-end of the Asian financial crisis, and is leaving it in the middle of the worst economic crisis since the 1930s Great Depression.

The Asian crisis resulted in his inheriting a gigantic $23.2 billion (about R174.6?billion) net open forward position (NOFP) from his predecessor and mentor Chris Stals. Stals, in a bid to prop up the rand, pulverised by currency traders, hiked the interest rates to 25.5% at one stage and borrowed dollars in the forward market to artificially keep the rand strong.

This did not work and the rand weakened further instead of appreciating.

Mboweni closed the NOFP in early 2003 and started steadily building up reserves, helping the country to receive good credit ratings. He is leaving behind foreign reserves worth $38.8 billion.

The inflation targeting policy of Mbeki’s administration made Mboweni unpopular with labour though workers loved him before he became governor.

As Mboweni closes the chapter on his governorship, questions are being asked about his response to the current global economic crisis. He misread the economic cycle by eight to nine months.

When it became clear early last year that the global recession was coming South Africa’s way, he failed to cut interest rates and only started acting in December that year.

Had he acted earlier and more boldly, perhaps the jobs carnage we are now seeing could have been avoided.

But overall, we should be proud of Mboweni’s tenure – he did well.

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