Category Investments

Ratings agencies likely to view Mboweni as “credit positive”

10 October 2018 Citadel Investment Services

The appointment of Tito Mboweni as the new Minister of Finance is likely to be viewed as a positive by credit ratings agencies and markets, placing South Africa in excellent stead for reigniting economic growth and investment, says Citadel Director and Chief Investment Officer George Herman.

“While it is somewhat unfortunate that former Finance Minister Nhlanhla Nene’s resignation took place two weeks before the Medium-Term Budget Policy Statement (MTBPS), his resignation is unlikely to have any material effect on the statement, as the budget process is a machine that runs mostly without the Minister,” he explains.

“Ratings agencies are therefore unlikely to be overly concerned by this rotation, and will rather focus on the credit dynamics that will be published in the MTBPS.”

He notes that Finance Minister Mboweni’s experience and confidence should stave off any risk of a credit rating downgrade despite a challenging fiscal environment, and as a well-known and respected government official, his appointment is in fact likely to yield numerous positive spin-offs in the short-term.

“All South African markets are likely to react positively to this development, and when compared to many of our emerging market peers, South Africa is finally re-establishing itself as an excellent investment destination with good leadership, improving policies and solid governance under President Ramaphosa.”

Herman further adds that former Finance Minister Nhlanhla Nene deserves enormous respect for taking the decision to step down after failing to disclose private meetings with the controversial Gupta family.

“Whatever one’s personal opinion of him may be, he should be applauded as the first South African politician to have apologised and fallen on his sword for having played a role in State Capture, without having been found guilty of any transgressions in a court of law,” he says.

“Furthermore, the fact that President Ramaphosa specifically cited governance as his reason for accepting the resignation represents a huge step forward in his administration’s fight against corruption. This may go down in history as the beginning of South Africa’s political cleansing, and hopefully Nene’s example will encourage other implicated politicians to do the same.”

He points out that President Ramaphosa’s swift, yet calm handling of the matter will also be a huge boost to investor and business confidence, as will the fact that Minister Mboweni is a loyal confidant of the President who will help to enlarge and solidify the President’s circle of influence.

Minister Mboweni has indicated that he was proud that the “three TM’s”, or Thabo Mbeki, Trevor Manuel and himself, Tito Mboweni, had been able to manage an economy that grew in excess of 6% per annum.

“And while it remains to be seen whether the present triumvirate of Cyril Ramaphosa, Tito Mboweni and South African Reserve Bank (SARB) Governor Lesetja Kganyago will be able to generate the same results, I wouldn’t bet against them.”

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The Financial Sector Conduct Authority (FSCA) released a notice extending the CPD cycle for 2018 until 31 July 2019. What is your opinion on this?


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