No amount of champagne, cakes or booze-fuelled parties can mask the reality of the what the ANC has become.
Former Reserve Bank Governor Tito Mboweni listens to the Minister of Finance, Nhlanhla Nene, as he delivers his Budget Speech Address in the National Assembly on February 25, 2015 at Parliament in Cape Town. (Photo by Gallo Images / Foto24 / Lertao Maduna)
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On Tuesday, 9 October, President Cyril Ramaphosa faced his first major crisis as president with courage, conviction and clarity.
Revelations made against Nhlanhla Nene robbed him of the one essential commodity he needed to execute his functions as Minister of Finance: trust. For any minister, but more especially one that is in charge of the nation’s economy, trust is needed to create the space for them to retain the authority to make tough decisions. In this regard the president’s appointment of Tito Mboweni strikes all of the right notes.
I raise the issue of trust across three key dimensions. In a political economy as complicated and sophisticated as South Africa, these dimensions of trust-based engagements are often contradictory.
From a political point of view a South African Minister of Finance has to have a high trust relationship with the governing party. Given Mboweni’s seniority within the ANC, his ability to restrain, temper and appease the contradictory demands of fellow cadres within the movement is key.
I have had the fortune of observing Mboweni’s stern principle-based leadership as a member of the same branch as him. His attention and energy paid to young leaders has made him popular among the young generation. His gravitas and development economics expertise give him essential cache amongst elder party members. This will help him manage the expectations of senior party members who lead an increasingly fragile unity within the ANC.
From a big business point of view, they have recently committed to invest R100bn into the economy over the next 5 years. They have also pledged to buy locally and in so doing create 275 000 jobs next year. These pledges assume a competent treasury department, that is able to effectively regulate the economy using a moral high ground that can only be occupied if Treasury itself is beyond reproach.
Minister Mboweni has no known scandals and his tenure at the South African Reserve Bank was unblemished by perceived or real impropriety.
Lastly, the black business constituency has gradually lost trust in the ability of the Ministry of Finance to aggressively move ahead with initiatives to level the playing field.
Radical economic transformation has so far only found real expression in the form of funding for black industrialists. Much more is needed in this regard. Black business is suffering disproportionately from the current recession because they lack access to sufficient working capital facilities that can bridge cash flow problems. Where new opportunities are available black businesses lacks access to properly priced growth capital.
Black businesses need to trust the fact that they have a champion in the form of a finance minister who can spearhead their entrance into the economic mainstream. Since retiring from public service, Mboweni has been an active champion of this very cause.
The current economic crisis is happening in a context of ever-increasing economic imbalances. South Africa has been a safe haven for local and international investors for many years. In fact, the JSE is the most successful stock market in the world over the last 100 years.
According to the 2017 edition of the Credit Suisse Global Investment Returns Yearbook, “Over the years since 1900, the South African equity market has been one of the world’s most successful, generating a real equity return of 7.2% per year, which is the highest return among the Yearbook countries.”
Is it our world class managers or unbelievable investor acumen that has caused this phenomenal track record? With all due respect to the talented asset managers this country possesses, there must be an alternative reason for this performance.
More likely, the reason for this performance is a concentration of information and opportunity in the hands of a few privileged, almost exclusively white investors combined with the subsidy effect of passive black savings made available over the years.
This combination of informational concentration among a hand full of investors using savings that include significant black and government savings pools for the purposes of funding established businesses is unsustainable. Over time these businesses are net job shedders adding rather than helping to improve unemployment. Something drastic has to be done.
Recent calls for a State Bank and a Sovereign Wealth Fund are as much about access to capital by black business as they are about alternative savings platforms. Different stakeholders within the ANC, EFF and black business have been advancing this cause.
The public scepticism opposing these initiatives are driven by mistrust. There is a mistrust of government to act as an effective custodian of funds. There is a mistrust of government officials to act as allocators of these proprietary funds.
A strong minister with the capacity to call a spade a spade and in so doing facilitate a national conversation about how a State Bank and a Sovereign Wealth Fund can work to broaden access to capital, to improve leverage of existing and future savings with the objective of levelling the playing field is needed.
In Minister Mboweni, South Africans might just have found a person they can trust with these important interventions.
- Hlumelo Biko is a South African businessman and investment banker.
Disclaimer: News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.
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