South Africa’s New Finance Chief Pledges Policy Continuity

(Bloomberg) -- South Africa’s new finance minister pledged to pursue policy continuity and said he’s committed to the Treasury’s existing fiscal framework and spending restraint.

In his first interaction with investors since being appointed to the post last week, Enoch Godongwana said that while his style may differ from that of his predecessor Tito Mboweni, his approach toward managing the nation’s finances will be similar.

“I will be sticking to the sustainable fiscal path he has chosen,” Godongwana, 64, said Friday on a conference call organized by Standard Bank Group Ltd. and HSBC Holdings Plc. “The fiscal framework is to some extent sacrosanct. I don’t see much changing in that fiscal framework.”

The rand pared a decline and bond yields fell as Godongwana spoke. The rand was little changed at 14.7885 per dollar by 3:50 p.m. in Johannesburg, rebounding from a loss of as much as 0.6%. The yield on the most-liquid 2026 government bond was 3 basis points lower at 7.4%, after trading as high as 7.44%.

Godongwana’s appointment as a replacement received a vote of confidence from Fitch Ratings, which said he accepts the need to avert a debt crisis and that it didn’t anticipate any immediate impact on the Treasury’s fiscal plans.

Under Mboweni, the Treasury committed to stabilizing the nation’s debt ratio at 88.9% of gross domestic product by the 2026 fiscal year and changed its focus to make a primary budget surplus its most critical fiscal anchor, instead of a spending ceiling. Its plans, which included spending curbs, have been opposed by some members of the ruling African National Congress and its labor-union allies.

Struggling Economy

Godongwana faces an onerous task turning around an economy that shrank the most in a century last year, when stop-start restrictions were imposed to curb the spread of the coronavirus, and has since battled to regain momentum. While surging commodity prices have given the government a tax windfall, it is facing pressure to do more to counter the fallout from the pandemic and violent riots last month that saw thousands of businesses being looted and ransacked.

“There are additional pressures to the system which need some fiscal support,” said Godongwana, who identified the state wage bill, debt-stricken state companies and debt-servicing costs as the main risks to state finances.

Godongwana has served as head of the ANC’s economic transformation committee for almost decade, playing a central role in formulating its policies. He has voiced opposition to its plans to change the constitution to make it easier to seize land without compensation, as well as proposals to nationalize the central bank.

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