New finance minister Godongwana has big boots to fill

New finance minister Enoch Godongwana (64) has some big boots to fill as he replaces Tito Mboweni, who was well-known in the financial markets and steered the ministry with a very firm hand, often refusing to accede to requests for more money for bail-outs and public sector wages.

Until now Godongwana was head of economic development for the ANC and chairperson of the Development Bank of Southern Africa. He is a former deputy minister of public enterprises and later economic development, MEC of economic affairs, and later finance in the Eastern Cape.

He comes from a union background where he was a shop steward for the Metal and Allied Workers Union, general secretary of the National Union of Metalworkers of South Africa, and head of economic policy at Cosatu. He completed an MSc degree in financial economics at the University of London in 1998.

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Shadow of corruption

As with many other ANC members in high office, Godongwana has a shadow of corruption following him.

In August 2012, an inquiry into an investment company, Canyon Springs, which lost textile workers’ pension funds, found that Godongwana and his wife, who owned 50% of Canyon Springs, was among those who “were party to the carrying on of the business of the company, either fraudulently or at least recklessly,” Wayne Duvenage, CEO of Outa, points out.

Canyon Springs had allegedly borrowed and lost R120 million of clothing workers’ pension funds, and a commission of inquiry was established to compile a report on the matter, in which Godongwana at the time testified that he was unaware that the loan came from a union pension fund.

Godongwana had denied any knowledge that the pension money had been invested in the company and it is believed that the money was never recovered.

“We are not aware of the Canyon Springs inquiry report being overturned. He was deputy minister of economic development and resigned soon thereafter,” said Duvenhage.

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Wait and see

Economists who spoke to The Citizen all agreed that Godongwana is not as well-known as Mboweni and that the president had better candidates to choose from.  

While he has spoken out about various issues in the past, the consensus is that South Africans will have to wait and see how he performs.

Prof. Jannie Rossouw from the Wits Business School says he is very sad to see Mboweni go, because he was an excellent minister of finance. “I would have preferred Dr David Masondo, the deputy minister of finance. I do not think we can afford to have a minister of finance with a cloud of corruption hanging over his head.”

He says while South Africans did not get the cabinet of national healing they needed, he acknowledges that Godongwana has standing in the party, but that will mean nothing if he does not ensure financial and fiscal stability.

“His big test will be his first budget in February next year, because the Midterm Budget Statement for September has been completed.”

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Untested in financial world

Economist Mike Schüssler also says Godongwana has been untested in the financial world and has been in favour of using pension fund money for government’s infrastructure programme and instituting a basic income grant, which South Africa cannot afford.

“However, it is not so much Godongwana, but the ANC itself that has no clear policy of how to get us out of the financial mess that we are in.”

He says Godongwana is a big-wig in the ANC backrooms, strong in the ANC and caucuses, which means that it will be easier for him to get what he wants, although he will not say ‘no’ easily. “He will have to make big choices to split the small amount of money the country has. Luckily the ministry is very competent with a lot of institutional memory in the central bank as well as national treasury.”

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More entrenched in ANC politics

The Bureau for Economic Research (BER) at Stellenbosch University says while Godongwana’s history involves accusations of impropriety, linked to his resignation as the deputy minister of economic development in 2012, he is well known by international investors and should provide reassurance on the government’s stance on reform.

“Godongwana is more entrenched in ANC politics than Mboweni and therefore a key question is whether he will, to the same extent as Mboweni, push back against the demands from the alliance partners for a looser fiscal policy over time.”

The BER also says Godongwana’s recent opinion piece, in which he argues for a balance between improved GDP growth, job creation, and social assistance is a positive in this regard.

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‘On the right, but closer to Mboweni’

Peter Attard Montalto, head of capital markets research at Intellidex, believes Mboweni was forced out by the SACP and Cosatu with the President’s approval and did not in fact resign. He describes Godongwana as a complex character and a strategic player, who was the ‘best choice available who half-wanted the job’.

“Cosatu and the SACP have a good working relationship with him although we would not say they necessarily agree on everything at all. However, he has clearly passed muster with them to be appointed.”

Montalto says he is certainly on the ‘right’ and closer to Mboweni than others say, although he is certainly to the left of Mboweni.

“We think he is broadly fiscally conservative in the SA mould although that is a low bar in reality and still means continual fiscal slippage from here. He is pro-coal, more pro-state-intervention and backs employment schemes more than BIG although he is a pragmatist politically who will end up backing BIG.”