BUSINESS and economists are keeping a close eye on newly appointed Finance Minister Enoch Godongwana and his approach to policy, but have pledged to support him in the wake of Tito Mboweni’s surprise resignation and as President Cyril Ramaphosa announced a Cabinet reshuffle.
Ramaphosa on Thursday appointed Godongwana, the Development Bank of Southern Africa’s chairperson, as finance minister in a Cabinet reshuffle.
Investors were expecting the initial market reaction to Mboweni’s resignation and Godongwana’s appointment to be slightly negative, owing to Mboweni’s austerity posture.
Anchor Capital’s investment analyst, Casey Delport, said the appointment of anyone else other than Mboweni was going to be a more fiscally negative move given his hard line on reining in expenditure.
Delport, however, said Godongwana gave voice to more centrist views in the ruling party and was seemingly pro-growth reform as chairperson of the ANC’s economic subcommittee.
“It remains to be seen whether he will resist the temptation to spend the windfall commodity taxes garnered the last few months and instead focus on rebuilding our nation’s finances,” she said.
“The real question, however, is whether Enoch Godongwana will stick to the debt limits that Tito has set or if National Treasury will go back into tolerating slippage as seen throughout much of the decade.”
Although a neo-liberal scholar, Godongwana is a proponent of structural reforms, public investment in infrastructure and small business development as part of a growth strategy. However, he is not without controversy. In early 2012, he resigned in haste as deputy minister of economic development when a company he had ties to allegedly swindled about R100 million from clothing factory workers’ provident funds.
Godongwana denied being involved in the scandal and offered to repay some of the money.
North West University’s Business School economist Professor Raymond Parsons said the latest Cabinet changes should nonetheless reassure business and were “broadly acceptable”.
Parsons said it was regrettable that Mboweni had decided to resign, but Godongwana was nonetheless an experienced successor.
“But (he) will need to show in the forthcoming Medium-Term Budget Policy Statement (MTBPS) in October that South Africa remains strongly committed to fiscal consolidation and sustainability in its public finances,” Parsons said.
“Above all, the reconfigured Cabinet needs to have a sense of urgency about the remedies and reforms now needed to get the South African economy back on to a job-rich growth path, including closer co-operation with the private sector.”
Business Unity SA chief executive Cas Coovadia said the sector would strive to work positively with the ministers appointed by Ramaphosa, particularly in the finance department.
“We believe a review of his Cabinet was necessary, given the state of our economy, a lack of direction in the critical interventions needed for investment and growth, as well as the recent attempt to destabilise the state,” Coovadia said.
In an interview with eNCA after the ceremony, Godongwana said even though he was yet to get a briefing on the extent and nature of the challenges, everyone knew the economy was not performing well.
“As a result we have got higher unemployment, and that becomes in my view a critical challenge, how we are going to grow this economy,” he said.
On Friday, the JSE All Share Index closed 0.44 percent higher at 68 673.95 points.
However, the rand later on Friday tumbled against a strong dollar on US jobs data.
The South African currency lost around 40 cents against the dollar over the 24-hour period after Godongwana’s appointment and traded late on Friday evening around R14.63 to the dollar, according to Chris Harmse, an economist of CH Economics.
The dollar on Friday doubled an earlier gain after US jobs data added to arguments for a faster tightening of monetary policy in that country, according to Reuters.
BUSINESS REPORT ONLINE