Mboweni’s appointment: Namibia’s baby
The appointment of a new finance minister in South Africa was received positively by the economy of Namibia too but external effects remain a major factor to look at.
NDAMA NAKASHOLE
At this stage, the strength of the rand is highly influenced by South African politics and the perception of its economic stability by local and foreign investors.
Also, the Namibian dollar’s one-to-one peg with the rand means that the local economy is directly affected by changes in perceptions of the South African economy.
These were some of the comments made by PSG Namibia yesterday in reaction to new developments in South Africa, where the finance minister was replaced by a former central banker on Tuesday evening.
After the news broke of Nhlanhla Nene handing in his resignation letter on Tuesday following confessions of links to state capture, the rand fell to below 15.00 to the US dollar.
Later in the evening, Ramaphosa said he had accepted Nene’s resignation and the rand recovered to 14.75 following the appointment of Tito Mboweni, a former central bank governor.
The Namibian economy and government income are dependent on the state of the South African economy, through SACU revenues and others, PSG emphasised in its commentary.
“Any positive changes or improvement in economic growth in South Africa will be of benefit to the Namibian economy,” the firm said, adding that a drive by President Ramaphosa to fix the South African economy and clean up his government would assist a recovery in the Namibian economy.
PSG added: “The South African rand is influenced by perceptions of the government’s reliability and potential to spur economic growth and when perceptions are positive, then investor, business, and consumer confidence in South Africa should rise, strengthening the rand.”
PSG said even though the rand’s initial reaction to the South African finance minister swap was a positive one, its strength soon dissipated also owing to several external factors.
SA economics
According to PSG Namibia, emerging markets are not in favour at this time in a general sense, given global economic growth and political uncertainty. Ramaphosa is taking the necessary steps to prove that he is serious about ‘cleaning up’ his cabinet from corrupt individuals, but the relief from this move yesterday was short-lived, the firm further said.
“Markets reacted positively to the news of Tito’s appointment, with the rand and the banks rallying as the news broke. Be that as it may, Tito’s appointment is no panacea for the economy’s challenges.”
It will take longer for the president’s plays to speak for themselves, it said.
“SOEs remain a major risk and require urgent action, while fiscal constraints restrain ability to stimulate the economy. Tito (Mboweni) needs to ensure that government spending remains well managed and that SOEs are better managed and convince locals and foreigners that he is capable of this,” PSG further said.
Confidence
A local economist and analyst at Cirrus Capital, Dylan van Wyk, yesterday said the fact that the rand picked up was an indication of confidence in new finance minister Mboweni.
“In my opinion this is an indication that the appointment of the former South African Reserve Bank governor reflects confidence in the new minister, who is a veteran in financial affairs,” Van Wyk said.
Mboweni has been in the private sector for nearly a decade since his departure from the SA Reserve Bank, and according to Van Wyk, this “makes it likely that he would not be prone to linkages to state capture”.
“He is 59 years old, which means he is still young enough to serve beyond the next elections,” he added.
Unlike Nene’s previous replacement, Mboweni might actually serve a full term as finance minister, Van Wyk said.
In her commentary yesterday, Standard Bank Namibia economist Naufiku Hamunime yesterday said: “With SA growth prospects having been revised downwards by both the World Bank and the IMF - on the back of a poor performance in the agriculture sector and rising inflation, the new finance minister’s most important immediate task will be to reassure markets and credit rating agencies that the country is committed to fiscal discipline when he presents the medium-term budget statement on October 24.”
At this stage, the strength of the rand is highly influenced by South African politics and the perception of its economic stability by local and foreign investors.
Also, the Namibian dollar’s one-to-one peg with the rand means that the local economy is directly affected by changes in perceptions of the South African economy.
These were some of the comments made by PSG Namibia yesterday in reaction to new developments in South Africa, where the finance minister was replaced by a former central banker on Tuesday evening.
After the news broke of Nhlanhla Nene handing in his resignation letter on Tuesday following confessions of links to state capture, the rand fell to below 15.00 to the US dollar.
Later in the evening, Ramaphosa said he had accepted Nene’s resignation and the rand recovered to 14.75 following the appointment of Tito Mboweni, a former central bank governor.
The Namibian economy and government income are dependent on the state of the South African economy, through SACU revenues and others, PSG emphasised in its commentary.
“Any positive changes or improvement in economic growth in South Africa will be of benefit to the Namibian economy,” the firm said, adding that a drive by President Ramaphosa to fix the South African economy and clean up his government would assist a recovery in the Namibian economy.
PSG added: “The South African rand is influenced by perceptions of the government’s reliability and potential to spur economic growth and when perceptions are positive, then investor, business, and consumer confidence in South Africa should rise, strengthening the rand.”
PSG said even though the rand’s initial reaction to the South African finance minister swap was a positive one, its strength soon dissipated also owing to several external factors.
SA economics
According to PSG Namibia, emerging markets are not in favour at this time in a general sense, given global economic growth and political uncertainty. Ramaphosa is taking the necessary steps to prove that he is serious about ‘cleaning up’ his cabinet from corrupt individuals, but the relief from this move yesterday was short-lived, the firm further said.
“Markets reacted positively to the news of Tito’s appointment, with the rand and the banks rallying as the news broke. Be that as it may, Tito’s appointment is no panacea for the economy’s challenges.”
It will take longer for the president’s plays to speak for themselves, it said.
“SOEs remain a major risk and require urgent action, while fiscal constraints restrain ability to stimulate the economy. Tito (Mboweni) needs to ensure that government spending remains well managed and that SOEs are better managed and convince locals and foreigners that he is capable of this,” PSG further said.
Confidence
A local economist and analyst at Cirrus Capital, Dylan van Wyk, yesterday said the fact that the rand picked up was an indication of confidence in new finance minister Mboweni.
“In my opinion this is an indication that the appointment of the former South African Reserve Bank governor reflects confidence in the new minister, who is a veteran in financial affairs,” Van Wyk said.
Mboweni has been in the private sector for nearly a decade since his departure from the SA Reserve Bank, and according to Van Wyk, this “makes it likely that he would not be prone to linkages to state capture”.
“He is 59 years old, which means he is still young enough to serve beyond the next elections,” he added.
Unlike Nene’s previous replacement, Mboweni might actually serve a full term as finance minister, Van Wyk said.
In her commentary yesterday, Standard Bank Namibia economist Naufiku Hamunime yesterday said: “With SA growth prospects having been revised downwards by both the World Bank and the IMF - on the back of a poor performance in the agriculture sector and rising inflation, the new finance minister’s most important immediate task will be to reassure markets and credit rating agencies that the country is committed to fiscal discipline when he presents the medium-term budget statement on October 24.”
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