Godongwana is a close political ally of President Cyril Ramaphosa and an African National Congress heavyweight who cut his teeth in the labor union movement.
Since the fall of apartheid, South Africa projected the tenacity of hope and despair in equal measures. Days of demonstrations in July that left scores dead and ravaged an economy already on its knees have been followed by a somewhat lukewarm development—the appointment of likable conformist Enoch Godongwana as finance minister.
Godongwana is a close political ally of President Cyril Ramaphosa and an African National Congress (ANC) heavyweight who cut his teeth in the labor union movement. He replaces Tito Mboweni, who was hailed for tangible efforts to stabilize the economy amid extremely difficult circumstances, including the Covid-19 pandemic. Even so, it was during Mboweni’s three-year tenure that South Africa plunged into one of the worst recessions on record.
While the task of rebuilding South Africa will be formidable, Godongwana can take a cue from the International Monetary Fund (IMF), which has upwardly revised the country’s growth outlook for 2021 from 3.1% to 4% based on a “strong positive surprise” in the first quarter.
However, the numbers don’t tell the entire story of South Africa’s economy. The country desperately needs widespread reforms to attract investments, create jobs—particularly for the Black populace—and undertake fiscal consolidation, including reigning in debt and public-spending waste and expanding the tax bracket.
“Godongwana has long resisted the ANC’s ‘tax-and-spend’ fiscal approach and rather believes in structural reforms,” says Robert Besseling, founder and CEO of intelligence firm Pangea-Risk.
Besseling doesn’t believe that Godongwana will have the independence to dictate fiscal policy, but he could be the conveyor belt that President Ramaphosa needs to accelerate reforms, expand state-owned-enterprise privatizations, widen the tax base and seek an IMF credit facility. “The real power base of the economy and country’s finances has shifted from the treasury to the presidency, so Godongwana alone will not be dictating fiscal policy,” he says.
The partnership between Godongwana and Ramaphosa could be ideal in accelerating much-needed reforms. The worry, however, is whether it will be effective in directing revenue, including from the commodity boom, to fund expansionary policies with wider economic impacts.