Dawie Roodt predicted Tito Mboweni’s exit — here is what else he said
Staff Writer 12 August 2021
Efficient Group chief economist Davie Roodt has accurately predicted the exit of former finance minister Tito Mboweni, and the reason for his exit is not good news for South Africa.
Last year, Roodt said the ANC’s main purpose is to seize the state to feed and maintain its own massive patronage.
“Without consistent high state spending, the ANC simply loses its reason for existence,” Roodt said.
Mboweni did not favour this doctrine, which resulted in him being side-lined in the party and in his untimely exit from the cabinet.
In February 2021, Roodt said the ANC and its alliance members made it extremely tough for Mboweni to cut state spending and stabilise the country’s fiscal trajectory.
“Ideologically, Tito Mboweni does not sit around the same table as many of his colleagues, and I will not be surprised that he is only there for the show in the short term,” he said.
Roodt’s prediction that Mboweni would not last long in the current political climate proved prophetic.
On 5 August, President Cyril Ramaphosa replaced Mboweni as finance minister with former unionist Enoch Godongwana.
“I have also accepted a long-standing request by Minister Tito Mboweni to be excused from his position as minister of finance,” Ramaphosa said.
Mboweni’s departure as finance minister should not come as a surprise.
In May 2020, Mboweni said he was a free man with no political constraints before he voluntarily joined the government.
After this decision, he said, “you have to obey the majority/collective decisions. Sometimes it feels like swallowing a rock.”
Shortly before his departure, Mboweni said one needs a sense of the political standard deviation.
“Where are things going which accord with your ethics, values and beliefs. Sometimes, the ship might be sailing in the wrong direction. Jump before you are pushed but don’t drown,” he said.
Tito Mboweni, former Minister of Finance
In a presentation at the Free Market Foundation, Roodt said South Africa is on a path of destruction, similar to countries like Zimbabwe and Venezuela.
While these countries where economies were destroyed are not the same, there are similar patterns in how economic destruction occurs.
The first step to destroy a country’s economy is when politicians, through the government, start to destroy existing capital.
Capital destruction is clearly seen in South Africa’s state-owned enterprises like Eskom and Denel, where politically connected people destroyed these once excellent companies.
Well-functioning and valuable companies were gutted for self-enrichment and to execute misguided political ideologies.
The second step is to frighten the taxpayers through ever-increasing tax rates. Increased taxes are needed because the state runs out of money because of corruption and mismanagement.
In South Africa, tax rates are at an all-time high as the country struggles with a large fiscal deficit.
Ultimately you reach the curious situation where increasing taxes does not increase tax collection much, as the taxpayers are already overburdened.
Desperate for more money, the government now has to look at other places to fill the growing hole. Pensions are an obvious choice.
The third step in destroying a country’s economy is where savers are getting scared that the government will hurt their savings.
Roodt said this is happening in South Africa with the ANC’s prescribed assets plans, which will give politicians control of pension funds and where this money is invested.
Savings are, however, a limited resource. After tax revenues and savings dry up, the country reaches the endgame.
The fourth and final step is when a country prints more money to try and inflate itself out of debt. Inflation reduces the value of money and, therefore, the value of debt.
Roodt said this is why the ANC wants to get control over the SA Reserve Bank (SARB). If you can control the country’ central bank, you can get rid of your debt.
It has devastating consequences on an economy, as was seen in Zimbabwe and Venezuela over the last two decades.
Roodt said this would not happen within the next few years while SARB Governor Lesetja Kganyago is in charge.
However, with South Africa’s destructive government in power, Roodt said it is the inevitable end to what we see today.