The argument by the Organisation for Economic Cooperation and Development (OECD) that tightening South Africa’s wealth tax regime would rebalance ... generational inequality has a fundamental flaw: it targets a “flighty” base, says an expert from the African Tax Institute.
“Yes, Minister Godongwana is aware of the decision. However, for now, he will not be commenting on it,” Mfuneko Toyana, Godongwana’s spokesperson, confirmed in a written response to The Africa Report late on Friday.
This ends weeks of speculation about whether Godongwana could become the third successive finance minister to relinquish the position during President Cyril Ramaphosa’s first term as head of state.
A regional prosecutor in Mpumalanga declined to proceed with the case lodged against Godongwana in early August, a month when South Africa commemorates efforts of women anti-apartheid activists to resist the since-abolished oppressive system.
Godongwana had been accused of alleged inappropriate conduct towards a masseuse during a private visit to the Kruger National Park.
In two statements issued on 13 and 18 August, Godongwana denied the allegations, insisting rather that we would continue “… executing my duties by focusing on the critical tasks of revitalising our economy and protecting the fiscus”.
But it’s not the first time the Minister is caught up in scandal. Here are 10 things to know about Godongwana.
1. Scandal prone
Godongwana is no stranger to controversy. In January 2012, he resigned as deputy minister of economic development to “pursue personal interests”. This was around the time when Godongwana was linked to a company accused of defrauding millions of rand from the pension fund of Southern African Textile and Clothing Workers’ Union members.
2. Many lives
In 2009, a high court invalidated the Pillay commission report, which fingered Godongwana and other senior Eastern Cape politicians in grand-scale financial impropriety. That court decision paved the way for Godongwana to pivot into national politics in 2009 when he was appointed deputy public enterprises minister in former president Jacob Zuma’s first executive.
3. Third time a charm?
In August 2021, President Cyril Ramaphosa hired Godongwana as finance minister, marking the latter’s re-entry into national government. Godongwana is Ramaphosa’s third appointment to the portfolio, the previous ones having been Nhlanhla Nene (February 2018 to October 2018) and Tito Mboweni (2018-2021).
4. Party man
Although a surprise candidate for the finance minister position, Godongwana proved himself indispensable as chairperson of the African National Congress (ANC’s) economic transformation subcommittee.
On that ANC subcommittee, Godongwana advanced an orthodox and market-friendly policy posture while fending off a rising populist tide within the governing party driven by the Radical Economic Transformation (RET) faction.
Crucially, as the former general secretary of the National Union of Metalworkers of South Africa and a regular fixture on the Congress of South African Trade Unions’ central and executive committees, Godongwana holds sway among the country’s powerful public labour union movements.
5. Rand effect
Akin to a prime minister, the finance minister commands the country’s macroeconomic policy and has influenced markets and sovereign credit rating agencies. The uncertainty that surrounded Godongwana’s fate raised jitters about renewed rand volatility.
Nene’s unexpected sacking by Zuma in December 2015 triggered a meltdown of the rand, which lost as much as 15% in value, and wiped out R378bn ($21bn) from the Johannesburg Stock Exchange as foreign capital took flight.
S&P Global Ratings classifies the rand as an actively traded currency. S&P’s view is informed by the 2019 Bank for International Settlements triennial survey, which shows that the rand contributes 1% of the global foreign exchange market turnover.
On 15 September, at the Government Employees Pension Fund annual conference in Cape Town, Godongwana told delegates that: “Since February, the rand has been among the worst-performing currencies against the dollar.”
The local currency began the year trading at R14/$1 and has slid to R18/$1.
6. Inflation pathway
The National Treasury recently completed a draft review of South Africa’s macroeconomic policy framework. Speculation was rife that this would include a possible downward revision of the country’s inflation target band of 3%-6%.
In a written response in June, however, the National Treasury told The Africa Report: “No, it [review] does not [include a lowering of the inflation target] as the objective of the review is not to announce new policy.”
Although the finance minister can propose legislative revisions to the country’s monetary policy framework, the central bank enjoys independence in implementation.
7. The fiscus
Godongwana’s insistence that he would continue to “protect the fiscus” was aimed at both foe and friend alike. The government is currently engaged in wage negotiations with public sector unions against the backdrop of fiscal consolidation.
The unions want more money, but it is ultimately Godongwana and the National Treasury that will determine the feasibility of any agreement reached between the negotiating parties.
In his inaugural budget in February, Godongwana said the government would use a revenue windfall to pay off government debt, a stance widely condemned by critics who contend the money could have been better used to address South Africa’s socioeconomic crises.
8. Economic revival
Godongwana is an important aspect of the government’s Operation Vulindlela programme, a package of accelerated reforms aimed at stimulating economic growth. A key part of his mandate is raising private sector investment by creating policy certainty and ensuring cohesive messaging about economic priorities.
9. Financial sector
The National Treasury is leading South Africa’s response to address deficiencies identified by the Financial Action Task Force (FATF). In a Mutual Evaluation Report published last October, FATF outlined significant weaknesses in the country’s anti-money laundering, counter financing of terrorism, and counter financing of proliferation.
South Africa has 18 months from the date of publication to take corrective steps, failure to which the country’s financial sector will be greylisted.
If we are grey-listed, that will have a huge impact on our financial sector.
On 21 September 2022, during an appearance before Parliament, Godongwana told legislators: “If we are grey-listed, that will have a huge impact on our financial sector.
“That is why we are spending sleepless nights to deal with this question – [what would happen if South Africa was to be grey listed?]. All of us want to avoid a greylisting.”
10. Budget season
The National Treasury has confirmed that the medium-term budget policy statement (MTBPS) will take place on 26 October 2022. As the dust has settled on his case, Godongwana will deliver the MTBPS speech, secure in the knowledge that his position remains relatively safe.
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