In the past six months, finance minister Enoch Godongwa has failed to hide his irritation with the heads of two of the most important institutions in the land – the governor of the Reserve Bank, Lesetja Kganyago and the commissioner of the South African Revenue Services (Sars) Edward Kieswetter.
Kieswetter had publicly expressed his opposition to abandon plans to increase VAT ahead of Godongwana’s first attempt to deliver the national budget in February.
In an embarrassing hot mic incident after a press briefing to announce the postponement of the tabling of the budget, Godongwana let it slip that he was angered by Kieswetter’s behaviour, prompting his colleague, minister in the presidency Khumbudzo Ntshavheni, to ask: Uhamba nini? (When is he leaving?)
In the past few weeks, the rumour mill at the Union Buildings and the Treasury has been on overdrive about Kieswetter’s imminent departure. Those in the know say discussions about his potential successor have begun.
The murmurings prompted Kieswetter to issue an internal memo to staff last week, informing them that he had started discussions with President Cyril Ramaphosa and Godongwana about his exit. But those with intimate knowledge of the developments suggest the reasons for his departure may be more controversial than he wants us to know.
Godongwana was again agitated last week, this time infuriated by Kganyago’s announcement that the central bank would pursue a lower inflation target of 3%. He told Kganyago in a missive that he was encroaching on his space, as monetary policy was the finance minister’s domain.
It was a dressing down that left many with lingering questions about the relationship between Godongwana and the governor. Didn’t Kganyago consult the minister before making such a major announcement? Was it necessary for Godongwana to issue such a harsh statement, rather than picking up the phone and calling his old friend?
There is a belief in government circles that the Reserve Bank had already started implementing the lower inflation target way before Kganyago’s announcement. Insiders say the first repo rate cut came in September 2024, despite consumer price inflation having fallen into the acceptable range a year before. Hence, Godongwana has the backing of many in the ANC and the government.
Kieswetter and Kganyago have two things in common.
First, both Sars and the Reserve Bank conducted investigations into the Phala Phala scandal that almost ended Ramaphosa’s political career. To refresh your memory, the president’s farm was broken into and thieves escaped with a stash of US dollar notes that were kept in a sofa. Sars found that Ramaphosa and the company running the farm had declared the funds and, therefore, were tax compliant.
The Reserve Bank found that there had been no exchange control violations during the transactions. Remember the “perfected transaction” phrase? Yes, the bank found that the transaction was not complete because Hazim Mustafa, the Sudanese businessman who bought the buffaloes, had not come back to fetch them.
Second, both Kieswetter and Kganyago had their terms of office extended by the president around the same time last year. Kieswetter was given an additional two years – his term expires next year – while Kganyago’s third five-year term conclude in 2029.
The decision to extend the contracts of these powerful individuals means they enjoy the president’s confidence. But Godongwana’s dressing down of Kganyago brings into question whether he feels the same. There is a clear breakdown in the political management of the relationship between Godongwana and the leadership of Sars and the Reserve Bank.
Decisions about inflation affect the economy and taxpaying consumers. Such decisions, therefore, should not be taken lightly. The war of words between Godongwana and Kganyago creates doubts about policy stability in government. It also sends a message that there is a disconnect between the National Treasury and the Reserve Bank.
Kganyago’s low inflation target approach is said to enjoy support from some bureaucrats at the Treasury who see its benefits. The root of the problem appears to be that Kganyago does not seem to possess the patience to allow Godongwana to be the one making announcements.
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