New Finance Minister reassures investors of continued monetary and fiscal policy prudence

ENOCH Godongwana, in his first interaction with investors since becoming the new finance minister, has pledged to pursue the Treasury’s existing fiscal framework spending restraint.

He told investors that while his style may differ from that of his predecessor, Tito Mboweni, his approach to managing the nation’s finances would be similar.

Godongwana had said much the same 10 days ago immediately after his appointment, telling eNCA that while there may be a difference in style, he did not “bring new ideas” when it came to fiscal and economic policies already driving the country.

The rand remained relatively steady immediately after his appointment, indicating that, for now, the markets had accepted his appointment as a positive step. He would, according to many market analysts, need to show in October’s Medium-Term Budget Policy Statement whether South Africa remained committed to fiscal consolidation and sustainability in its public finances, and whether debt limits set out by Mboweni would be adhered to.

Godongwana, addressing an investor call organised by global bank HSBC and South Africa’s Standard Bank, said a large public sector wage bill and financial pressure from state-owned enterprises posed a risk to South Africa’s fiscal framework, Reuters reported on Friday.

He assured investors of his long history in public finance, having joined the government when Trevor Manuel was finance minister. Manuel was finance minister from 1996 to 2009.

Godongwana was previously deputy minister of public enterprises and economic development. He also served on the ANC's economic subcommittee and in the past nine years has been the ANC head of economic policy formation and chairperson of the Development Bank of Southern Africa.

Treasury director-general Dondo Mogajane said he had worked with Godongwana when the latter was MEC for finance for the Eastern Cape. Mogajane said that Godongwana had always been in the “background” of the work done at Treasury.

On whether he would continue on the path set out by Mboweni, Godongwana said there would be “change and continuity” - there would be continuity in terms of the policy trajectory, he added.

“We come from the same party; we do not have different mandates, and from that perspective there will be continuity in terms of the sustainable fiscal path he has chosen,” he said. “As things stand, I do not see any changes in the fiscal framework.”

Godongwana said the government had to pursue a “balanced and prudent” fiscal strategy to stabilise public finances.

He said there were no additional tax measures for the medium-term expenditure framework. To deal with the risks, the government planned to reduce non-interest expenditure to the value of 4 percent of GDP, primarily from the wage bill.

“It will not be an easy task, but we are committed to it,” he said. The Treasury would also direct expenditure toward capital assets.

Godongwana said he was joining the Treasury at a time when there was a global economic recovery - which had benefited domestic commodity producers, which in turn had bolstered government revenues.

He said that the domestic economic recovery remained on track, and that there was work to be done on structural reforms to get the economy growing faster and to create employment.

– BUSINESS REPORT