Ramaphosa Brings In Key Ally to Help Revive South Africa Economy
New Finance Minister Faces Battle to Revive South Africa Economy
(Bloomberg) -- South African President Cyril Ramaphosa shook up his cabinet, appointing close political ally Enoch Godongwana as his new finance minister and overhauling the management of key security portfolios after a week of deadly riots.
Godongwana succeeds Tito Mboweni, who had held the post since 2018 and was a strong proponent of reining in the government’s debt and wage bill. A former central bank governor, Mboweni repeatedly said he wanted to return to the private sector, and he rebuffed Ramaphosa’s pleas to stay on in the job.
The new finance chief has been an advocate of investor-friendly policies, and cautioned against the ruling African National Congress’s proposals to nationalize the central bank and change the constitution to make it easier to seize land without compensation.
Godongwana is well known by local and international investors and has been proactive in seeking to water down populist policies advocated by Ramaphosa’s predecessor Jacob Zuma, said Gina Schoeman, an economist at Citibank South Africa.
“The choice of Enoch Godongwana is not a bad choice at all,” she said. “I know, for sure that if anything, Enoch Godongwana will not want fiscal policy to be the end of Cyril Ramaphosa.”
Godongwana, 64, will have his work cut out for him. South Africa’s economy contracted the most in a century last year after the government imposed stop-start lockdowns to curb the spread of the coronavirus pandemic. It suffered another setback last month, when rioting left 354 people dead and further dented already fragile business confidence.
A former labor unionist, Godongwana holds a master’s degree in financial economics from the University of London. He served as deputy public enterprises minister from 2009 to 2010, when he became deputy economic development minister.
He quit that post in January 2012, after he and his wife were embroiled in a scandal involving the alleged misappropriation of funds from the South African Clothing and Textile Workers’ Union pension fund. While he denied any wrongdoing, he offered to repay some of the money.
As head of economic transformation in the ruling party, Godongwana last year suggested measures to bolster the economy against the coronavirus pandemic that included getting the central bank to finance infrastructure spending. That proposal would place him at odds with Reserve Bank Governor Lesetja Kganyago if it was revisited.
The rand slumped at much as 2.5% against the dollar after Ramaphosa announced Mboweni’s resignation late Thursday, but later pared the decline to close 0.9% weaker after his replacement was announced. The currency rose 0.2% to 14.4849 by 9:45 a.m. in Johannesburg on Friday.
“Mr. Godongwana has a solid reputation as being a voice of reason within the ruling party, someone who is willing and able to engage both sides and bridge the policy gap between the populist and market-oriented factions,” said Michael Kafe, an economist at Barclays Bank Plc. “We believe that markets are likely to warm up to him once he has had the opportunity to speak on key policies in the coming months.”
Ramaphosa also fired his defense minister and announced that the State Security Agency would be brought under the control of the presidency in the wake of the protests that saw thousands of businesses looted and destroyed. The president said Thursday that the security forces were ill-prepared for the unrest and steps needed to be taken to prevent a recurrence.
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The changes to the leadership of the security portfolios were decisive, while “fresh blood” was needed at the finance ministry, said Susan Booysen, director of research at the Johannesburg-based Mapungubwe Institute for Strategic Reflection.
Mboweni has “really not been showing much enthusiasm,” she said. “Godongwana will really have to prove himself but we know he is a very loyal Ramaphosa ally. He knows that there are very, very urgent needs. The ANC’s credibility depends on getting its economic policy right.”
Ramaphosa appointed four new cabinet ministers and reassigned six others. The appointments include:
- Mondli Gungubele as minister in the presidency.
- Thandi Modise as defense minister.
- Joe Phaahla as health minister.
- Khumbudzo Ntshavheni as communications minister.
- Mmamoloko Kubayi as human settlements minister.
- Ayanda Dlodlo as minister of public service and administration.
- Senzo Mchunu as water and sanitation minister.
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