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Enoch Godongwana: heavy is the head

Government cannot spend its way to growth … it must constrain spending to improve the fiscal outlook.
Finance Minister Enoch Godongwana. Image: Moneyweb

I wish new Finance Minister Enoch Godongwana all the best for his new role. He is taking on one of the most difficult jobs in the country. It is central to business confidence – every move he makes will be keenly watched by both local and international business to detect whether it means an improvement or deterioration in the business environment.

He is succeeding Tito Mboweni who was successful primarily in two areas: structural reforms and fiscal discipline. These are fundamental to the outlook for the economy and the new minister must move quickly to signal his commitment to continuing the progress on both.

The sharply deteriorating debt position of the sovereign, which triggered the loss of investment grade ratings last year, is a risk to the entire economy. A fiscal crisis, which would inevitably trigger a financial crisis and deep recession, is a risk that businesses must factor into their outlook. That diminishes confidence and sharply reduces investment appetite, which in turn reduces growth. As a result, government cannot spend its way to growth – the impact on the sovereign balance sheet of spending at the current level of indebtedness damages confidence and can easily be net negative for growth.

There is no alternative but to constrain spending so that the fiscal outlook improves. In choosing what to restrain, Treasury must make difficult trade-offs. Consumption spending is the real problem – this has lower multiplier effects into the economy than investment. Investment must be central to our economic recovery thinking, as President Cyril Ramaphosa has repeatedly made clear.

Public sector investment is a key part of the overall investment drive and should be protected. It is consumption expenditure that must be constrained.

Structural reforms are also fundamental and have the potential to provide stimulus for free. The Operation Vulindlela project running between the presidency and National Treasury has been arguably the biggest confidence boost so far that the reforms often referred to by the president will become a reality. It will be important that Vulindlela gets the new minister’s firm and public backing, as it had from his predecessor.

Read: Structural reforms: Some progress

The advances that have been made, particularly in the 100MW energy generation licence threshold, have given a significant confidence boost to the economy. Following through with progress on bulk water infrastructure, spectrum auctions and fundamental reform to skills visas has the potential to add to that momentum. The new minister can accelerate the momentum along with some of his new colleagues in cabinet, such as new minister of communications and digital technologies Khumbudzo Ntshavheni.

Minister Godongwana will also have to manage the competing demands for finance from across government. A disturbing trend that business has been concerned about for some years has been a perception that Treasury’s authority on spending has become less absolute. Fiscal decisions that have no rational connection to policy objectives have become too common. The bailing out of South African Airways is an obvious example.

Of course, every part of government wants more money, but Treasury is the institution that must consider the trade-offs. It must be endowed with the skills to assemble and study the evidence for the real impact of spending choices. Evidence must be central to how our scarce resources are allocated. The minister will need to demonstrate great political skill to hold the line on this – his cabinet colleagues will need to accept it when Treasury evidence shows that their pet project is not in fact the best use of public money.

Then there is the question of policy.

Given that Treasury is best positioned to assess trade-offs across government, I believe it is also best positioned to understand the impact of policy on the economy. The biggest strides we’ve made as a country has been when Treasury develops and advocates for important policy changes itself.

Treasury needs to be more than a holder of the purse strings: it needs to be an active participant in deciding the best way to spend public money and the policy that affects how the economy operates.

Mboweni’s time in office was marked by the economic policy paper released in 2019 that was highly influential in the economic reconstruction and recovery plan that was agreed upon by all social partners and cabinet last year. The new minister needs to embrace and advance the policy development agenda to have a dramatic impact on the economy.

As I said, this is no easy job. The costs of failure are high.

However, the new minister will be able to count on the support of many stakeholders. Business is obviously one of those – we at BLSA are committed to assisting the government wherever we can to support policy development that can drive the economic recovery. For example we have invested in research and contributions on how to drive greater investment in public infrastructure and how to use localisation to boost jobs and growth and have seconded skills into government where there are gaps. We will continue to do so and look forward to a productive partnership with the new minister.

Busi Mavuso is CEO of Business Leadership South Africa


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Actually, instead of “constraining spending” he should be increasing production. Creating tax breaks and changing labour laws for micro and mini-micro enterprises.

But as an old capitalist who’s watched the US model for decades, what do I know? Sigh …

Heavy is the head — Filled with lead !!

And blind is the mind
which doesn’t know his own kind
But great is the day of tomorrow
For a Treasury which refuses to borrow
because in a flash of time
we can end up in subprime
and wake up to see that the Rand has sunk
where they always predicted- at junk.

Decentralise the economy and let the free market determine which businesses can be services its needs. All government has to do is regulated and uphold the rule of law.

There are 129 businesses which fall under the control of the government, how many of these are self sustaining?

There is R2.8Trillion worth of National Debt, its hard to find but municipal and SOE debt is about R2.5Trillion plus the same value for consumer and business debt. That means SAs total debt is around R8Trillion

Start a national debt forgiveness program whilst stopping the lending of any new monies without collateral. Then add 2% to VAT and pay of the combine debt at 4% interest over the next 99 year at R27,18Bil a month.

At the moment things are overly and unnecessarily complicated which makes streamlining any operation extremely difficult, additionally the anc only has just over 2 years of governing left before the next general election. How Much can really be achieved with so many good ideas taking so long to not execute…

When the majority of a country’s citizens have been turned into the professionally unemployed, where they are paid to do nothing, then how do you curb spending? If you, as government, were the ones who arranged for it to happen, then you can’t change it, unless you accept that you will be hammered at the voting stations – and I don’t think the ANC is that benign. It will require a completely different ideology and a different way of doing things (which is sans of corruption, bribery, stealing, cadre deployment and the other ills we have in our society). No, I’m afraid it will take much more than a new FM to get the message through that we need to cut spending and that unemployed never was a job.

My long memory remembers that the very same people who are praising Mboweni today used to called him a unionist when he was first appointed.

The ANC is like the guy who took out a loan against his pension fund to pay his domestic worker and his gardener.

The government employees’ salary bill isn’t much more than a glorified social grant. Especially when we consider the low return on investment. Almost all the SOEs and every ANC municipality are dysfunctional and bankrupt, while the councilors and the employees receive their full salaries plus “benefits”.

Then, we still have free education and various social grants. It is clear that South Africans use populist politics as a tool to force open the piggy bank of the nation. The people who vote for a living outnumber those who work for a living. Keep in mind that the vast majority of voters and senior politicians are not creditworthy in their personal capacity, but the constitution entrusts them with the creditworthiness of the entire nation. Such a situation of unaccountability and irresponsible behaviour patterns cannot end well. The system rewards unaccountability and incentivizes plunder.

The Debt/GDP ratio, budget deficit, stagnant economy, and unemployment rate prove that we cannot raise taxes and we cannot take on more debt. Government debt, plus so-called contingent liabilities(debt guarantees to SOEs), amount to R5 trillion. The total pension savings of the nation amounts to R4 trillion. The GEPF owns only R1.6 trillion in assets. We have transferred the value of pension savings of individuals in the private sector to fund the consumption habits of the rest of society. The pension savings act as a buffer against sovereign default. We have consumed the buffer.

From now on, any increase in debt-funded spending will have to be financed directly from the purchasing power of the currency. We have reached our Venezuela or Zimbabwe moment.

Scrap BEE and make it free trade for all, stop suppressing the minority of this country because they are leaving these shores by the tens of thousands each month. They are the majority tax payers of the country, the faster they leave the faster the countries revenue depletes!


Too late : we will end up with pensioners like myself having our hard earned savings / pensions raided : my kids and their substantial tax contribution are gone : well done to them just in time .

“Godongwana chaired Canyon Springs Investments 12, a shell company which he jointly owned 50% of with his wife. Canyon Springs was found to be involved in allegedly defrauding clothing factory workers of R100-million of their pension fund money from 2007 until 2011.His R1.5 million salary was found to be drawn from money loaned by the Southern African Clothing and Textile Workers’ Union (Sactwu) to the company, which loaned money was never returned to the union.He claimed to be unaware of the company’s money sources.

Richard Kawie and Sam Buthelezi, other co-owners of Canyons Springs Investment 12, had fraud cases opened against them for not repaying the union’s loan” – Wikipedia

Only R100m ? This guy is a lightweight klepto-cadre. Must def lift his game to match the other cadres. He’ll learn no doubt.

Pointless to comment. Nothing will happen. The ANC’s mantra is: “Say one thing, do the opposite, preferably do nothing”.

I am still looking for evidence of the structural reform and fiscal discipline that Mboweni is apparently famous for.

Can’t blame people for having changed their minds about Mboweni; the first thing he said as finance minister was;”There’s no holy cows,” referring to ANC/Gordhan obsessions like SAA and other SOEs.

Unfortunately he ended up having to tow the line – even being reprimanded about his absolutely accurate statement on Twitter about the central bank of Zambia. As though Mboweni should exist without Twitter, and bury his head in the sand like the rest of the ANC bunch. (How dumb of Ramaphosa at the time.)
Mboweni is the outspoken type – thank goodness for that!

Fiscal discipline, yes, but structural reform?

So many to choose from and spineless Cyril couldn’t find one without a blemish ???

Drop Company tax to 9% & Individual income tax to 15% max. Scrap CGT and Estate Duty tax.

Will SA’s market be capable of handling a few billion USD of investment inflow? (within the 1st day of trade after announcement..)

…then I awoke from my dream, and realised who rules the cuntry.

End of comments.



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