Alec Hogg (00:01) Well, two days ago, the Finance Minister, Enoch Godongwana, told South Africa that we have emerged from the fiscal wilderness. Debt has stabilised. Ratings agencies are happy. And it hasn't been a bad week for him indeed, except that he's having to cut into his weekend to talk to us, which we really appreciate. Thank you, Minister, for postponing your weekend. Must have been a heck of a week for you.

Enoch Godongwana (00:24) It's very difficult. Yeah, I've just come out of the joint committees of Parliament.

Alec Hogg (00:31) Well, I think the thing that caught me most by surprise in your speech this week was your reference to Alan Beesley. And I didn't know who Alan Beesley was until I looked him up, and he's an ActionSA finance spokesman. What did he do that warranted you actually pointing him out?

Enoch Godongwana (00:52) In every meeting, he always fights us about funding SARS. So in this case, not only have we funded SARS, we've moved, from the next financial year, because we've got revenues, to this year. We've moved SARS funding into the adjustment now. So he's a happy man.

Alec Hogg (01:17) Well, I can tell you that his boss, Herman Mashaba, who I spoke to yesterday, said, "You see how much good work we're doing in Parliament at ActionSA." But perhaps you can dwell a little bit on "out of the wilderness". There was an overrun on the revenue, R54 billion. That's lots of money. But the problem that was raised by Dawie Roodt when I spoke to him was he said that our tax burden as a percentage of GDP has now got to a record level, 26.8% [check]. Does that bother you at all?

Enoch Godongwana (01:56) It does, because for us to be competitive, first on the corporate income tax, we've got to have our tax levels as a percentage of GDP lower. And secondly, the income tax is also quite problematic for individuals who are sitting at the threshold of the high-income groupings, at about 45%. So those are not necessarily comfortable levels for any Minister of Finance.

Alec Hogg (02:33) But to continue to keep us out of the wilderness, I presume that you're going to have to get economic growth now. Because if there's not much more that you can tax, that would be the most obvious option.

Enoch Godongwana (02:48) Right. I mean, the point we have been making is that... let me take you first, before that, to what is now known as Budget 3.0 last year. What I said was, look, it's going to be difficult to say we're going to fund any priorities or increases in expenditure using additional taxes. Mind you, the most sensitive additional taxes are corporate income tax, personal income tax and value-added tax. Those are the three biggest taxes. If you can't continue raising those, then you've got a challenge. And that challenge is that you have got to find ways of making sure that government spending is efficient. That's what we said last year.

And therefore we have embarked on that journey now. You will see, for instance, that of the revenue that we have raised, the actual taxes were R17.1 billion above, which is an overrun. The remainder of the R45 billion [unclear: ASR reads "grant expenditure was too efficient"; likely "growth in expenditure was due to efficiencies"] ... making sure that we can get efficiency in the system.

Alec Hogg (04:13) So that's starting to kick in then, getting value for money and cutting out the problem areas. Where was the biggest win on that side?

Enoch Godongwana (04:24) Of course, the biggest win was on social grants [ASR: "social trends"; possibly "social transfers"]. There's a lot of duplication, fraud and other related things in the social grant system. For instance, somebody may say, "I'm not employed, and as a result I need to get the R370 [ASR: "T-70"; check]." When you go to the bank, there's some income coming in.

So we're cleaning all of that data to make sure that you have savings in this regard.

Alec Hogg (05:00) How efficient are you now in tracking people's flows? You would have thought SARS is pretty sharp; eFiling has got to be amongst the best in the world. Are there other sophistications with technology going forward that you can share? Where would you be on that road?

Enoch Godongwana (05:21) Yeah, I mean, in the context where people are struggling, higher cost of living, energy prices and so on, even if SARS does track the people, in most cases they try and negotiate, which means you are not likely to get the amount right now. People say, "OK, let me spread the money over two to three years." So as a result, although that money is trickling down [sic, as spoken], it's because of those kinds of challenges.

Alec Hogg (05:58) Minister, the economic growth rate that you're targeting, 1.2%, seems very low when we've got a population growing at more than that. So, contracting GDP per capita. What are you telling your colleagues in Cabinet that we can do to lift that growth rate?

Enoch Godongwana (06:20) I think we must make a distinction between what I'm targeting and what is actually happening. OK? What I'm targeting is something about 3%, and I've said that. But the reality is the economic performance at this stage... we've revised down to 1.2% for a variety of reasons, including the global challenges that we're facing. So our target is 3.3% [check], above 3%, but the reality of the economic performance at the moment is that we're likely to come in at 1.2%.

What is to be done? There's a tendency for people to think that in one stroke you can use fiscal policy to achieve all of the economic objectives in the country. I think that's misplaced, in my view. There are other challenges that we need to be talking about. Let me just give you an example. I made two examples yesterday. One is the fact that, for instance, we've got state-of-the-art legislation on the environment. The guys that found gas in Namibia started in South Africa, but they couldn't proceed because of environmental challenges. That's the first. So we've got to look at the environmental issues, at the regulatory framework.

We also mentioned the point that a friend of mine has sent me. Look, on the exploration front, countries like Canada and Australia, with the same mineral endowment as South Africa, in 2024 did exploration of roughly 40 billion [currency not stated; check] each, around, and we did a mere two billion. So clearly there are things that we need to do on the mining front. As a mining jurisdiction, we've got to do something on the mining front to grow that sector. So I'm mentioning this to suggest that a lot of this cannot be resolved by fiscal policy alone. The entire regulatory framework which governs specific sectors has got to be looked at with a close eye.

Alec Hogg (08:54) I'm sure that will give a lot of people much celebration, particularly on the oil and gas side, where it does appear as though we're sitting on an incredible endowment in South Africa, but we can't get out of our own way. But you say it's the environmental regulations that are holding us back there.

Enoch Godongwana (09:13) Precisely.

Alec Hogg (09:16) And why are our environmental regulations so poor from a developmental perspective?

Enoch Godongwana (09:25) We put forward legislation which, in my view, is Rolls-Royce legislation, which far exceeds even the developed nations in terms of its requirements. As a result, it is mining, it is exploration for oil and gas, offshore and onshore. So it's quite a difficult situation. We've also got to look at other regulatory issues which impact on other sectors. As we have done with the structural reforms in electricity, logistics and so on, we've got to say what else has got to come into the equation as part of the structural reforms which we need to achieve.

Alec Hogg (10:23) God, it does sound crazy when you've got Norway, which is one of the most environmentally conscious countries in the world. It's been drilling for 50 years and we still haven't been able to get through. But I think you've explained it now very well there. On the mining side, though, there are big flags being waved about BEE. Is that still a no-go for the Government of National Unity?

Enoch Godongwana (10:48) I suspect, in my view, we're chasing the wrong issue, or thrusting [sic, as spoken] the wrong issue. It may be one, but not an important consideration. You know, a colleague of mine drew my attention to this matter, and I'm taking more interest in exploration. And I'm talking to my colleague, and we would like to say something in this regard.

He says, you know, most of these countries are using what is called venture capitalists. Most of the exploration in these countries is done by venture capitalists, not the big guys. And the venture capitalists are incentivised to be able to do that. And we've got to ask: is that also a template we can copy?

We're looking at all those areas. We would like, by February, to be able to say something about exploration.

Alec Hogg (12:07) I don't want to put words in your mouth, but it appears to me that the templates that we would like to copy now are those that have been practically successful, rather than the templates we copied in the past, which were Rolls-Royces, as you said a bit earlier.

Enoch Godongwana (12:23) We would like to ask: what are the other mining jurisdictions, what have they done to be able to succeed? And we've got to take those success cases, whether it's Chile, whether it's Australia, whether it's Canada, or any other mining jurisdiction.

Alec Hogg (12:49) Minister, your decision to distribute more funds to those failing municipalities has raised a few concerns. What's behind that? Because you were very firm in cutting off the funds from those failing municipalities. Now it looks like you're going to keep them going.

Enoch Godongwana (13:13) I think one of the things we've got to take into account is that behind those municipalities are human beings who are going through a high cost of living. Food prices, energy prices, bulk services increases from Eskom, water and other things. That's what the communities are facing. So you see what we're trying to achieve there. We're saying we need to be providing about R21.8 billion to help these communities deal with the rising cost of bulk services. That's the main purpose.

However, you will see, within the same section where we're making this point, we're putting it together with the reforms we're doing in municipalities. Among other things is the amendment of the Municipal Finance Management Act, to make sure that accountability is stronger than it is at the moment. So parallel to that, we're providing the resources, the amount, to give communities better services, but at the same time introducing reforms for better accountability. Yeah.

Alec Hogg (14:52) So a little bit of carrot, but quite a bit of stick.

Enoch Godongwana (14:56) Yes, correctly so. You know, let me just give an example. One of the criticisms we had in July was that we're using a blunt instrument, which is purely to withhold funds. The unfortunate thing is that that's the only instrument we have at the moment, in terms of Section 216 of the Constitution, which has been translated into the Municipal Finance Management Act. We're then saying we need to develop other, sharper instruments, so that we don't only rely on Section 216 and withholding. So the commitment to hold these municipalities accountable remains and is not going to change.

Alec Hogg (15:54) We have on BizNews a very active crypto group, where they talk about Bitcoin and crypto, and they're very interested in that. And they were celebrating your comment where you said that you're going to look at crypto differently. Can you explain what brought that on?

Enoch Godongwana (16:14) There has been some discussion. We issued a discussion document [the MTBPS describes these as draft capital flow management regulations] for public comment, different views have emerged [ASR: "of the image"], and there have been useful comments which have come through from the players in this sector. Maybe some of your people who are active.

Alec Hogg (16:37) Probably, probably.

Enoch Godongwana (16:42) What we want to achieve is not necessarily [unclear: ASR "true"]. We're not saying, look, we want people not to use [unclear: ASR "capital"; the MTBPS refers to draft capital flow management regulations covering crypto, so "capital" may be correct] completely. What we want is to ensure that it can be utilised in a more [unclear] way; people must ensure compliance. That's the strategic objective. And therefore there have been suggestions from the sector, which we will take into account. We're going to publish a new document and say, from what you have said, this is our understanding of what you people have said. Are we in the right direction? Can we get further comment?

Alec Hogg (17:25) Minister, thank you again for giving us part of your weekend. It really has been interesting having this conversation. Before I go, though, you've had a tough week. What is the toughest challenge that you've had to face in these past few days of putting this medium-term budget together?

Enoch Godongwana (17:48) The toughest challenge has been the fuel price, because we are dealing with... we are chasing a moving target. And at the same time, people think that it's easy to chase that moving target, in an environment where your fiscal targets are under threat. So this has been one of the difficult issues facing us in the budget preparation thus far. Otherwise, given the fact that we've had sufficient revenues this year, it has been an easy one, other than that challenge.

Alec Hogg (18:41) Thank you for that. And I'm pretty sure that a big part of at least helping you in that regard is that the rand has been stable, if not strong. And that's also to do with that inflation target. I see you're a fan now of inflation targeting. I'm not sure you always were.

Enoch Godongwana (18:58) No, I mean, the point is that I've never been an opponent. I've never been an opponent. I've been a sceptic in terms of timing, as to at what stage you are likely to make an announcement on inflation targeting. I've been worried about the timing.

By the way, there was a mistaken belief that our disagreement with the Governor was about the substantive issues. It was not, because we had already agreed. We met, by the way, in Washington, when we attended the World Bank meeting [check], and we agreed that we're going to go for the 3%. We agreed. The issue was the timing of the announcement. That was the issue.

Alec Hogg (20:02) Well, thanks for clearing that up, and thanks again for the conversation today. The Finance Minister, Enoch Godongwana. I'm Alec Hogg from BizNews.com.

Enoch Godongwana (20:11) Thank you very much.

BN Edge | Mini-budget unpacked, with Finance Minister Enoch Godongwana