Tito Mboweni’s appointment could drive business confidence up further
Sacci says greater certainty will emerge after the medium-term budget policy statement and the investment summit
Business confidence has rebounded from its lowest level in more than a year and could surge after newly appointed finance minister Tito Mboweni delivers the medium-term budget policy statement at the end of October.
Alongside the investment summit in the same week, the medium-term budget is expected to provide greater certainty, according to the South African Chamber of Commerce and Industry (Sacci).
The business confidence index, which assesses the business climate, rose by 2.8 points to 93.3 in September 2018, from 90.5 in August. This was from a base level of 100. Every five years, the index is set to 100 and it increases or decreases from that point. The index was last reset in 2015.
The index was compiled at the end of September and does not reflect the events of the past few days. Former finance minister Nhlanhla Nene resigned on Tuesday, following public pressure over his testimony at the state-capture inquiry, where he admitted to meeting the Gupta family on numerous occasions, including at their private Saxonwold residence.
The survey did, however, take into account the economic stimulus plan announced at the end of September to reignite the economy after figures showed that SA had plunged into a recession for the first time since the global financial crisis.
Nene was replaced by Mboweni, a former Reserve Bank governor. Mbowen's appointment on Tuesday was well received in the political and business sectors. The rand firmed 41c from an intraday low of R15.06 to the dollar on the day of the appointment. Economists say a “credible” minister at the helm of the National Treasury bodes well for business and investor confidence.
“Mboweni was an inspired choice to replace Nene and the decisiveness of the move amid market uncertainty was widely welcomed,” said NKC analyst Gary van Staden.
Mboweni’s appointment was a confidence-building and reassuring step for the economy, said North West University economist Raymond Parsons.
“The latest change at the top of the National Treasury comes especially at a time when policy uncertainty remains in negative territory and when plans, policies and new initiatives to promote economic recovery and reform need high credibility,” he said.
SA’s public finances were in a perilous state and Mboweni would have to convince the country and financial markets that the Treasury was on top of the challenge, said Absa head of macroeconomic research Peter Worthington.
“The present business climate and restrained economic momentum originate from the economic and business environment over the past three years. It is important that these adverse conditions are dealt with in preparation [for] sustainable economic prospects with policy certainty,” said Sacci.
“The initiatives of the stimulus package, announced by the president, should be outlined in more detail over the coming months. It remains imperative to create and build institutional capabilities to implement and translate policy, plans and ideas into actual outcomes that can be measured and monitored,” said the chamber.
There has already been a level of policy clarity with the latest version of the Mining Charter. Last week, government, labour and business struck a deal at the Jobs Summit that could see the creation of 275,000 jobs a year.