SIKI MGABADELI: Finance minister Malusi Gigaba is off to Washington DC to attend meetings of the IMF and the World Bank. At a press briefing this morning he said he is confident that South Africa’s economy is resilient and robust enough to bounce back to investment grade. He says that he’ll be meeting with investors to provide assurances on South Africa’s economic stability. He also says he has told his new economic advisor to keep quiet.
Let’s chat to Thabi Leoka, who is an economist with Argon Asset Management. Thabi, thanks for your time this evening. Interesting presser this morning. Of course one of the big issues that he had to deal with this morning was the utterances of his new economic advisor and the eight-page document that he penned over the weekend.
THABI LEOKA: Yes. It must have caught him by surprise and given him a lot of difficulty because now he has to defend something that he didn’t write and defend his position, which is already vulnerable, given that he is the new minister, given the circumstances that he finds himself in, and how he was put in that position to begin with. And so the eight-page paper is an added difficulty to an already very testing time for the minister.
SIKI MGABADELI: He’s already having to deal with people questioning why the social partners are not travelling with him. Paint for us a picture of these spring meetings. You’ve attended them. What is generally expected at meetings like this?
THABI LEOKA: From my understanding, the minister will not be speaking. I think he attends the meetings so that he can actually learn, understand what are burning issues that other finance ministers are faced with. He can also plug into the difficulties of the financial and the economic world globally, issues that affect South Africa but don’t necessarily come from South Africa. They affect South Africans.
Capital flows are a big issue. International trade, monetary policy – those issues are what would come up. And they’ve just released the world economic outlook. So talking about growth and how we can stimulate global growth.
What also happens is that African finance ministers tend to also meet up together and talk about the difficulties in the African economies. I think for the minister it is a good learning ground for him to just pick up on what is of concern globally.
SIKI MGABADELI: Generally, though, you’d agree that people who invest in South Africa have a sense of what’s happening here, what the landscape is like, what they like and what they don’t like. How would he need to convince them that they are going to stay the course?
THABI LEOKA: I often say – and this is a truth from my experience – that foreign investors often know South Africa better than most South Africans. If you’ve bought South African debt you obviously want to understand how … is doing it, who is running the economy, what are the political nuances – because it has an impact on their investments. So they will be very interested in understanding and knowing the new minister. He will have a tough time trying to convince them of his current position and that he is qualified for this position.
Remember that the last time these investors met Team SA and the previous minister, Pravin Gordhan, they had seen them before and they had a healthy working relationship with him. So now we have a new minister and he has to prove himself and reassure these investors who know South Africa, who understand South Africa, who follow South Africa as closely as South Africans do – and they watch media live too. I can watch eNCA anywhere in the world and/or SABC or listen to you on SAfm anywhere in the world. They do too. They also read our newspapers so they understand South Africa, they understand the problems and the difficulties. And the minister will have to convince people who know about South Africa.
SIKI MGABADELI: Alright. We’ll leave it there. Thanks, Thabi. Thabi Leoka is an economist with Argon Asset Management.
We had a chat with him, David, this morning at the press conference – the minister. I did ask him what he was going to say to them. He said look, we are going to highlight all the positives in the country, that we’ve made certain commitments during budget about fiscal consolidation, about dealing with our debt. He said obviously they are worried about the contingent liabilities, the state-owned enterprises and all of those things, but we can say to them, look, we’ve got a plan, we are going to spend a lot of money or at least some time on infrastructure. He laid out a whole lot of things that sounded familiar.
DAVID SHAPIRO: So why did they fire Gordhan?
SIKI MGABADELI: That’s the question.
DAVID SHAPIRO: If that’s what they are going to do, why was he fired? What was the background?
SIKI MGABADELI: And they are worried that’s the question that the investors are going to ask.
DAVID SHAPIRO: I would ask: If that’s the reason, why did you fire a man who is so well respected? And secondly, as your previous guest said, what experience has he had? What kind of financial background does he have to take over such an important position and ensure that he sticks to those issues?
I think there is a deep-rooted concern about the present ANC, about President Zuma’s agenda. And I think that’s at the back of everybody’s mind. So will they believe him? Even if he says that, would you believe him? And that for me is the question.
SIKI MGABADELI: We are going to have to watch that one very closely and we’ll hopefully get a few of them after they’ve had that meeting.