Finance Minister of the year, Africa 2008
GlobalMarkets, is part of the Delinian Group, DELINIAN (GLOBALCAPITAL) LIMITED, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 15236213
Copyright © DELINIAN (GLOBALCAPITAL) LIMITED and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement
Polls and Awards

Finance Minister of the year, Africa 2008

Trevor Manuel, South Africa


On the morning of September 23, as news of Trevor Manuel’s resignation as finance minister broke, currency traders and investors sold the rand and South African assets. Within a couple of hours the rand had fallen 3% against the dollar. But days later, as news emerged that Manuel would probably be re-installed, the rand promptly recovered most of its losses.

The episode highlights the pivotal role of the former anti-apartheid activist in shoring up South Africa’s economic reputation. 

“The markets’ response demonstrates that, irrespective of whoever holds the presidency, it is the maintenance of Manuel as finance minister that is most important to uphold investors’ confidence in South Africa’s economy,” says Chris Scicluna, senior emerging market economist at Daiwa. 

Manuel and 14 other ministers resigned in solidarity with Thabo Mbeki, who was ousted as president of the ruling African National Congress (ANC) over the weekend of September 20/21. Manuel was subsequently re-appointed by interim president Kgalema Motlanthe to reassure investors that it would be business as usual despite the ascendancy of leftist sympathizers in the ANC executive. 

Investors fear a Jacob Zuma presidency in next year’s elections will mean a lurch to the left in terms of economic policy and government spending. With Manuel staying at the helm, near-term policy continuity should help assuage their concerns.

Buoyed by the backing of president Nelson Mandela and then Mbeki, Manuel has been given free rein to pursue an austere economic agenda with tight fiscal policy, privatization and an inflation-targeting monetary framework. These policies have transformed the country’s creditworthiness, securing annual growth of 5% over the last four years while the budget deficit has fallen from 6% of GDP in 1996 to a 1% surplus in the 2007–08 fiscal year.

In a country ravaged by HIV/Aids, unemployment and poverty, these policies have proved controversial. But his impassioned defence of its merits helped to reduce internal dissent in the early years, earning him the accolade of most popular figure in the national executive committee at the 2002 ANC conference. “He is a great communicator and made himself very accessible to investors and the wider public at large,” says Razia Khan, regional head of research for Africa at Standard Chartered.

South Africa reported its first budget surplus in 2007. A combination of increased prosperity, high commodity prices and a wider tax base were credited with the surge in revenue. Manuel increased spending for education, housing and sanitation.

But his reputation has since been dented by the growing backlash against tight government spending, resulting in his popularity dipping this year. “He has been the main architect of the so-called ‘Washington consensus’,” Moeletsi Mbeki, political economist and brother of the former president, tells Emerging Markets. 

“[Manuel] has been responsible for the de-industrialization of the country and the removal of agricultural subsidies that have exacerbated income inequalities. This has made him unpopular among many South Africans.”

The markets’ response to Manuel’s unexpected temporary resignation highlights South Africa’s vulnerabilities, with its 7.3% current account deficit and dependence on hot money inflows. His concerted efforts to bolster the country’s defences have helped, but in this new political climate, it is still not clear if his legacy will be left untouched.

Gift this article