South African President Cyril Ramaphosa, left, shakes hand with newly elected Finance Minister, Tito Mboweni, in Cape Town, South Africa, Tuesday, Oct.9 2018. Former finance minister Nhlanhla Nene resigned after acknowledging missteps during the scandal-tainted tenure of former president Jacob Zuma. (AP Photo)

CAPE TOWN – South Africa’s newest Minister of Finance, former Governor of the SA Reserve Bank Tito Mboweni, has been welcomed by the market with the rand recovering earlier losses against the dollar after the announcement.

TreasuryONE dealer Gerard van der Westhuizen said on Wednesday that this market reaction vindicated the move by President Cyril Ramaphosa to call Mboweni up to fill former Finance Minister Nhlanhla Nene’s position. 

“The appointment is with immediate effect and comes at a time where stability is what rating agencies seek and whether they approve the decision we will have to wait and see on Friday afternoon as Moody’s take centre stage, said Van der Westhuizen.

Moody’s will give a rating review for South Africa and the rating’s agency indicated earlier that it would not downgrade the country’s rating.

Citadel director and chief investment officer George Herman said Mboweni’s appointment was 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.

“While it is somewhat unfortunate that former Finance Minister 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 said.

“Rating 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 said 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.

The Banking Association South Africa (Basa) welcomed the appointment of Mboweni as Minister of Finance.

The association, which has worked closely with Mboweni during his tenure as Reserve Bank Governor, said it was confident that he had the skills and experience to manage the fiscus and help the economy to recover, in these challenging times.

“He will have to win and maintain the confidence of the financial markets as well as the business and investor communities while facilitating inclusive economic growth, job creation and social development,” Basa said in a statement.