Johannesburg – South Africa’s new Finance Minister, Enoch Godongwana, will have a mountain to climb to rein in ballooning public debt.
Godongwana, who has long been touted for the position, has one silver lining: the backing of the private sector and economists, who have given his appointment to the key ministry the thumbs up.
Momentum Investments economist Sanisha Packirisamy said Godongwana’s popular standing and influential position in the national executive committee (of the ANC) could provide him with enough political clout to push back on unaffordable fiscal demands.
“His previous position as head of the economic transformation committee of the ruling party ensures that he has had his finger on the economic development pulse for several years.
“He is well-known in financial markets and is generally viewed to have a more market-friendly approach to economic reform,” Packirisamy said.
“In our opinion, he advocates the use of social compacting to reach equitable economic outcomes. The backing of a strong technocrat, in the director-general position in National Treasury, suggests this overall move in the Finance Ministry to be broadly positive.”
Government debt to gross domestic product (GDP) in South Africa increased to 83% in 2020 from 62.20% in 2019. In February’s Budget, the Treasury forecast the deficit to more than double to 14% of GDP in the 2020/21 fiscal year.
Debt as a ratio of growth is seen reaching 87.3% by 2023. Godongwana will have to convince investors and ratings agencies that the country’s public debt will not spiral out of control.
The former trade unionist previously served as general secretary of the National Union of Metalworkers of South Africa from 1993 to 1996 and served on trade union federation Cosatu’s executive and central committees from 1992 to 1997.
Minerals Council South Africa CEO Roger Baxter said the council has had many dealings in the past decade with Godongwana in his capacity as ANC head of economic transformation.
“We look forward to Minister Godongwana’s efforts to improve the difficult fiscal situation the country continues to face, notwithstanding the improved revenue collections for which our industry is partially responsible. We trust that any new policies that the National Treasury is asked to finance will be based on fiscal sustainability,” he said.
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