Enoch Godongwana can be pleased with his first formal introduction to the markets as SA’s new finance minister. Granted, it was a brief, stage-managed event — he spent less than 30 minutes on a call to investors fielding a few obvious questions chosen by his hosts, HSBC and Standard Bank.
Even so, he managed to hit all the right notes. And the markets liked it.
Perhaps just as important as his words is the fact that Godongwana engaged with the investment community only a week after being appointed, when he could have waited a month or more to settle in — a brave move for any new minister.
In taking the initiative, he obliged the wishes of Business Leadership SA CEO Busi Mavuso. She had urged Godongwana to "move quickly" to signal his commitment to pursuing fiscal discipline and the structural reforms necessary to boost growth, in line with the stance of his predecessor, Tito Mboweni.
Godongwana did exactly this, saying nothing is really going to change in terms of SA’s fiscal stance and commitment to debt stabilisation on his watch.
In his opening remarks, after being effusively welcomed by National Treasury director-general (DG) Dondo Mogajane, the new minister made it clear that the solution to SA’s fiscal challenges is faster growth, not treating this year’s commodity windfall as a permanent source of revenue.
He listed SA’s main spending pressures as the need to purchase vaccines, respond to the latest unrest and, in the longer term, state-owned enterprises (SOEs) and the public sector wage bill.
On structural reform, he mentioned the liberalisation of the Transnet National Ports Authority as an important first step while also expressing support for the move to allow private sector firms to generate up to 100MW of their own power.
He wasn’t asked directly whether he supports calls for a basic income grant (BIG), but repeated his stated views that SA needs to get more people into jobs rather than relegate the youth to life as passive welfare recipients.
Ninety One head of SA investments Nazmeera Moola’s two main takeaways from the event are: "First, that the minister seemed to have a good relationship with National Treasury officials, which is a prerequisite for policy execution. And second, that the minister was very clear that the revenue overrun was a windfall and needs to be treated as such."
But while Godongwana said all the right things and was well-prepared, warm and engaging, he didn’t exactly shoot the lights out. A participant described his performance as "deeply underwhelming". Another said: "He didn’t put a foot wrong, but wasn’t super impressive either. You didn’t leave thinking: here’s a man with a grand plan who will execute it."
Intellidex head of capital markets research Peter Attard Montalto was frustrated by the curated nature of the event: "The National Treasury’s asset and liability management division should know by now that it is in no-one’s best interest to have bankers trying to win issuance mandates asking vetted questions deliberately designed not to offend, rather than a transparent and open market question-and-answer session."
But Citibank economist Gina Schoeman feels market expectations are sometimes too high. After the call she felt "tentatively optimistic", noting that "it’s always a relief to hear that no-one’s going to change the fiscal plan".
Even so, she concedes that to really get growth going, the entire cabinet must support the Treasury. "Unfortunately, I don’t think the cabinet’s changed much," she says. "Ultimately, we need to see more reform."
The thing is, while the markets liked Mboweni’s commitment to fiscal rectitude, he didn’t do any of the political legwork to make sure the rest of his cabinet colleagues were on board.
So, his track record on spending was patchy as he was ultimately forced to yield to repeated bailouts of SAA and other loss-making SOEs and carve out space for unbudgeted public sector wage increases, albeit reluctantly.
It’s no secret that the markets would have preferred to see someone like former FirstRand CEO Sizwe Nxasana, former Treasury DG Lungisa Fuzile or Reserve Bank governor Lesetja Kganyago take over the hot seat.
But given that the finance minister must come from within the ranks of the ANC, the fact that someone of Godongwana’s calibre existed is actually a godsend.
And if the more politically persuasive Godongwana can build alliances to support the fiscal stance where Mboweni failed, the country might even be better off under his tenure.
Only time will tell, but Godongwana certainly has his work cut out for him. Over the next 12-18 months he must tackle Eskom’s balance sheet, facilitate a tight 2022 public sector wage deal, shepherd the BIG debate to deliver social justice without busting the budget and strengthen Operation Vulindlela to unlock the reforms needed to spur growth.
Well, no-one said being the finance minister would be easy.
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