We need to contain the wage bill: Godongwana

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Finance Minister Enoch Godongwana says for South Africa to become an attractive investment destination, the energy crisis has to be resolved and improve logistics to get goods to markets efficiently amongst others. He was speaking to the U.S. Investors virtually in the SA Tomorrow Investor Conference in New York.

The conference is focused on solving the country’s infrastructure and logistics constraints in an effort by both the SA private sector and government to attract new investors into that space.

He says the major problem facing the country is the capacity of the economy to service its growing debt.

“We, first and foremost, have focused on curtailing expenditure, there are a whole range of measures which are intended to curtail this expenditure. We make the point, for instance, that we’ve got to contain the wage bill and among other things, it is voluntary severance package is to manage national attrition. There’s some institutions there which are dealing with this. Think the interesting figures there was that the natural attrition in government was 70,000 employees per annum. So you manage the wage bill, reorganize how government works and reorganized institutions.”

SA Tomorrow Investor Conference | “We need to contain the wage bill”: Enoch Godongwana:

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Also speaking at the event virtually, the Reserve Bank governor, Lesetja Kganyago sought to explain why the country’s monetary policy was anchored in an inflation targeting framework. The framework gives the central bank the flexibility to recalibrate its tools to get inflation back to target.

He says the Bank’s monetary policy approaches to contain core inflation and the interest rate cycle.

“Why has the society become intolerant of inflation? If you look at South Africa’s headline inflation, it has risen up, but now to 5.4, and not a train smash, we are still within the target – we would like it towards 4.5. If you look at South Africans in this room, their inflation rate is actually standing at about 4.8. The poor South Africans who are in decile one, poor South Africans, they are facing inflation of just over 9%. I guess by now you get the drift. Any developmental strategy that would suggest that you must tolerate high inflation is anti-poor and this central bank is determined to protect the income of the poor.”

Kganyago has offered a pragmatic approach on continued interest rate hikes in a global environment of disinflation.

“When people ask on what basis and we justify the hiking and, you know, one of the things I have learned in this job is that English is more important than economics. So you check the central banks, the advance because central banks, they talked about keeping rates high for longer. Now they are saying higher for longer. Some of them are saying higher for long. And I and that is a central thing… to what does not reflect? It reflects the uncertainty that the central banks are facing at the moment. And so you have to constantly look at these risks and see what we could actually do and point us back to our previous decision. What is clear is that the current persistent levels of inflation cannot be dealt with by monetary policy alone, and one of the things that comes is that fiscal is going to have to play the party and come to the party.”