Deputy finance minister David Masondo, 45, is considered one of SA’s brightest, upcoming government ministers. He’s also seen as closer to the Left than finance minister Tito Mboweni, with more challenging views on hot-button issues, including whether SA should finance its burgeoning fiscal deficit through quantitative easing.
In a development that is likely to place Masondo more firmly in the spotlight, he has been tasked by Mboweni with shepherding through the pro-growth economic reforms contained in the National Treasury’s growth document.
Mboweni’s tetchy relationship with the Left perhaps explains why he has delegated the task to Masondo, a former national chair of the Young Communist League of SA.
The reforms are essentially aimed at increasing productivity and competition by reducing the costs of doing business and increasing private sector participation in all areas of the economy, especially those affected by inefficiency in state owned enterprises (SOEs), such as energy, ports and rail. In short, it requires the government to embrace the private sector as a far more significant partner in delivery.
The FM asked Masondo — who is a member of the ANC’s national executive committee and serves on its economic transformation committee (which has put out an alternative growth document) — whether this message is going to be a hard sell.
According to Masondo, the ruling party already accepts the significant role of the private sector in driving investment to create employment and enlarge the tax base to help provide public services.
Though state involvement in the economy is both "necessary and omnipresent", Masondo says "there is generally consensus, even within the ANC and the political Left, that any government intervention must increase economic growth, including by addressing the structural growth constraints".
"This requires us to reduce the cost of doing business and provide reliable and affordable electricity, rail, road infrastructure, ports, water, telecommunication, full-spectrum utilisation and education."
We have almost 700 SOEs and we honestly don’t need all of them. Some are a drain on our fiscus
— David Masondo
Masondo argues that "more private sector investment is required because the government on its own cannot afford to finance the requirements of our network industries".
For instance, he points out that there are "huge opportunities" for private sector participation in the port system, especially in constructing a super container terminal, as Transnet cannot do so on its own.
Regarding the need to pare back the degree of state ownership in SA, Masondo says: "We have almost 700 SOEs and we honestly don’t need all of them. Some are a drain on our fiscus.
"We have to generate criteria according to which we decide on which ones we need and for what. So, we also need to urgently rethink the extent of government ownership in some of them. Their business models [also] need to be urgently re-examined."
Masondo recently received push-back from the SA Reserve Bank when he said he would support direct bond purchases by the Bank to pay for Covid-related health and economic recovery measures.
The Bank has strong technical arguments for not wanting to embark on a widescale bond-purchase programme in either the primary or secondary market. It is mainly worried about the cost of sterilising these purchases, crowding out private bond-market investors, removing the need for fiscal discipline and, ultimately, jeopardising the value of the currency and stoking inflation.
Some would call Masondo’s comments a rookie mistake, given the long-established tradition of the Treasury not trespassing into the realm of monetary policy. Masondo is still relatively new, having been appointed as deputy finance minister only in May 2019.
But the same thing happened a year ago, in July 2019, when he questioned the tightness of the Bank’s monetary policy stance.
"I’m very aware of the instrument independence that the SA Reserve Bank has which is enshrined in the constitution as well as the SA Reserve Bank Act," says Masondo. "The division of responsibilities and accountabilities as well as complementarity between the Bank and the ministry of finance is very clear."
At the same time, however, he says it’s important that SA "begins to embrace the changes" triggered by the global financial crisis of 2008/2009 and the current Covid-19 pandemic. Both events have "put into focus policy innovation — such as quantitative easing [QE], flexibility and transparency — as elements of the modern paradigm of central banking", he says.
Masondo believes responding to the Covid-19 crisis, which requires policy solutions that address both the health and economic impact of the pandemic, requires considerable innovation.
"For such to happen, there must be closer co-operation and co-ordination, accompanied by robust, democratic debates on policy issues by all stakeholders; and there shouldn’t be any holy cows," he adds. "But we should conduct such debates in a manner that enhances the integrity of our economic institutions, including the Reserve Bank."
Independent economist Thabi Leoka thinks Masondo is "smart and measured", an asset to President Cyril Ramaphosa’s cabinet, and someone who would do well as a full minister. However, she does wonder whether he and Mboweni are always on the same page, pointing out that "Mboweni understands why QE is not appropriate for SA".
Given ongoing confusion as to which economic ideology SA should follow, Leoka argues that "a finance minister needs to be able to defend the National Treasury and the country’s economic policies with facts against attacks from those who know very little about economics but speak on it to suit a personal agenda".
Could Masondo successfully champion the Treasury’s pro-growth reforms? "I have no doubt he can," says Leoka, "he’s definitely not wayward." But she believes he will need guidance, mentorship and support from the cabinet.
Lumkile Mondi, senior lecturer in Wits University’s school of economics & business science, is even more confident in Masondo, saying: "He is capable of taking SA out of the health, economic and financial crisis by bringing all SA stakeholders, not only the financial sector, into a new growth agenda for inclusion and equality."
Last month, a group of about 100 left-leaning economists and academics penned a letter to parliament’s standing committee on finance urging it to reject Mboweni’s supplementary budget on the grounds that SA’s R500bn Covid relief package is being funded mainly through the reprioritisation of existing expenditure, not new money. This, they argued, means it won’t generate a significant impact and could, instead, compromise existing service delivery.
Do the academics have a point?
Masondo says the economists’ views were "well taken and are an invaluable contribution to the fiscal and economic discourse". However, the size of the package was determined by SA’s financial constraints against the backdrop of a persistent economic slowdown, dwindling tax revenue and rapidly growing debt-service costs.
"The National Treasury considered various potential sources of funding and how much additional funding could be mobilised from these sources," he says. "If we had money somewhere we could have allocated more, particularly to growth-enhancing economic activities."
The debt-stabilisation plan in the supplementary budget aims to get debt to stabilise at 87.4% of GDP by 2023/2024. Many economists feel this is too aggressive and is not going to be economically or politically feasible. More realistic, they say, would have been to budget for debt to stabilise at 100% a year or two later.
But Masondo argues that a debt ratio of 87% "is already very high", and questions whether a debt ratio of 100% would be sustainable.
"It is equally important to note that debt alone will not be able to resolve SA’s growth problems," he adds, "considerable progress is needed on the structural reform front."
After graduating from Marimane High School in Limpopo, Masondo went on to obtain a BA (Hons) and MA at Wits University, where he also served as president of the student representative council. He subsequently worked at the university as a lecturer in economics, and later obtained a PhD at New York University, focusing on post-apartheid industrial policy and SA’s automotive industry.
Masondo has held different positions in government, including as the finance MEC for Limpopo during a turbulent period in 2011, when it was put under administration by the National Treasury. After that he did a stint as a chief director in Gauteng’s department of economic development before being appointed head of the Gauteng government’s automotive industry development centre.
He is passionate about education and was the founding principal of the ANC’s political education school, the OR Tambo School of Leadership at Luthuli House. He is also a founding chair of the Topisa Trust — set up in honour of his mother, Topisa Evelyn Maluleke — which supports education, sport and cultural excellence among the youth in various villages in Limpopo.
To relax and unwind he loves reading, writing and running, and spending time with family. He is married and has two children.
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