Nene out, Mboweni in, rand reacts immediately
10 Oct 2018 - by Eugene Goddard
The rand showed an immediate improvement against the US dollar following yesterday afternoon’s news that Tito Mboweni had been appointed by President Cyril Ramaphosa to replace Nhlanhla Nene as finance minister.
The local currency gained 0.9% and held firm at 14.7178 against the Greenback when markets closed yesterday.
The gain significantly eroded an earlier decline of 1.4 percent and served to support the buoyant optimism that reverberated through markets after the news broke.
Bond yields against the benchmark 2026 also fell eight basis points to 9.21 points as hopes for fiscal stability at National Treasury rippled outwards, reaching the investment community.
Mboweni’s appointment could not have come at a more significant stage for the local economy.
It’s on the eve of Treasury officials attending annual meetings of the IMF and World Bank in Bali, where uncertainty over South Africa’s fiscal integrity could only have been heightened by the presence of Nene.
With the medium-term budget speech mere days away on October 22, analysts widely agree that Mboweni is the best person for the job.
Yesterday, as markets were still reacting to the dark cloud hanging over Nene’s head over his recent testimony at the Commission of Inquiry into State Capture, economists and opposition parties pleaded with Ramaphosa to take urgent action.
Rumours abounded that Gauteng finance MEC Barbara Creecy had been tipped for the job, with Reserve Bank governor Lesetja Kganyago also identified as a possible contender.
In the end it was one of Kganyago’s predecessors at the central bank that got the nod.
Mboweni’s decade-long stint as Reserve Bank governor saw the country’s forex reserves ballooning from $10bn to $40bn.
The apparent decision to pair Mboweni with Kganyago in the country’s two most important fiscal decision-making positions is seen as somewhat of a master stroke by Ramaphosa, coming at a time when all economic indicators appeared to point downwards.