Quoting Nelson Mandela and Charles Dickens, new Finance Minister Tito Mboweni’s climbed into the driving seat of South African economic policy, with aplomb, with his maiden mini-budget speech. His mere avuncular presence could revive comforting memories of better times – say, in 2005, when Mboweni was Reserve Bank Governor and the economy was cooking with 5% growth – times that the flagging economy needs to bring back badly right now.
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity,” says Mboweni with an apt quote from Charles Dickens in his book A Tale of Two Cities.
In his years of semi-retirement, spent fishing, farming and investing, Mboweni has been full of forthright opinions about what the once thriving South African economy needs to do to recover. Now he has a golden opportunity to do something about it in a tough job where he will have his work cut out for him in this quest for elusive growth.
With his trademark humour and forthright opinion, the mere expectation of the speech saw the rand running to a three-week high – yet it was peppered with worrying news. The growth figures tripped easily off the tongue, but is likely to be a concern: GDP growth revised downwards to 0.7 from 1.5%, in 2018, following a recession in the first half of the year, at a time when the world economy is growing at 3.7%. Growth is predicted to recover to a mere 2.3% by 2021.
Debt is another worry. Mboweni said gross debt is expected to stabilise at 59.6% of GDP, but only by 2023/24. Analysts believe this could not only mean South Africa spends millions more every year on repayments but also the undermining of the reputation of the economy in the eyes of the ratings agencies. On top of this tax revenue has been revised down by R27.4 billion in 2018/19, R24.7 billion in 2019/20 and R33 billion in 2020/21 relative to the 2018 Budget. This mainly reflects higher-than-expected VAT refunds.
Yet another worry is in the skies over Africa. Mboweni said there will be reform and yet more cash to bail out the ailing South African Airways, despite the view among analysts that this is good money being thrown after bad.
One of the biggest cheers during the speech was for the VAT zero-rating for sanitary pads, along with bread and cake flour. Long overdue, some said.
In this vein, on the positive side, with an election just around the corner, there was a pledge of trillions for certainties for the people in the shape of water electricity services, and social grants. Less clear is how Mboweni plans to kick start growth.
Mboweni rounded off with a quote from his mentor: Mandela.
“Difficulties break some, but make others. No axe is sharp enough to cut the soul of a sinner who keeps on trying, one armed with the hope that he will rise even in the end.”
If that is not a quote made for Mboweni and his new, difficult, job- I don’t know what is. But please, spare us more Dickensian Hard Times.