South Africa

Budget 2016: Gordhan’s back, but his back needs watching

By Ismail Lagardien 19 February 2016

While it is futile to speculate on the specifics of the Budget because the process of finalising the speech tends to be conducted behind closed doors, it is clear that Pravin Gordhan will focus, quite extensively, although not in the granular details, on preventing a downgrade of the country to junk status. By ISMAIL LAGARDIEN.

The second coming of Pravin Gordhan next week is expected to shake South Africa’s economy out of a near-terminal state of marasmus and, hopefully, convince investors and rating agencies that government is serious about addressing economic, financial and political challenges that beset the country. While he does that, someone has to watch Gordhan’s back, so to speak.

Gordhan will almost certainly announce belt-tightening measures at home, including an increase in taxation on high-earners, while trying to convince ratings agencies and foreign investors of government’s seriousness about the country’s woes. The main resistance Gordhan will get may well be from within the ruling alliance, especially from COSATU and the South African Communist Party (SACP), and also from the National Union of Metal Workers of South Africa (NUMSA), and the Economic Freedom Fighters (EFF). (More about them below)

Gordhan will be delivering his Budget at what is probably the lowest point in the SA’s democratic era. If the SONA 2016 got the undivided attention of the country, as we speculated at the end of January, the interest in this year’s Budget will receive blanket coverage. South Africans are waiting in anticipation. Never before have so many people expected so much from the country’s Minister of Finance; almost everyone will agree, for once, that the country is in a mess, and that President Jacob Zuma has been making the right statements – albeit under apparent duress.

While it is futile to speculate on the specifics of the Budget because the process of finalising the speech tends to be conducted behind closed doors and there are rarely any “leaks” from the team working on the speech. It is clear that Gordhan will focus, quite extensively, although not in the granular details, on preventing a downgrade of the country to junk status.

Rolling back the threats of a downgrade would go a long-way to addressing some of the country’s woes. The downgrade is, however, not a certainty. Xhanti Payi, an economist and head of research at Nascence Advisory and Research, made the point earlier this week that it is a “forgone conclusion” that South Africa will be downgraded to “junk status”. There is a caveat, though. He explained that it will take “a special effort to avoid this eventuality”.

Contradictory as it may seem (the one-handed economist is a rare beast) there is some value in his statement. It deserves a close reading, though, to get a grasp of the work that Gordhan and the most respected and competent leaders, like Cyril Ramaphosa, Edna Molewa, or Angie Motshekga have to do.

This notwithstanding, it is certainly fair to say that South Africa is “cruising” to an “economic junkyard” – the signs are ominous – but such a decision has not, actually, been made. Well, not yet, anyway. A downgrade can be avoided, and everything possible will be done to guarantee that it is avoided.

Having said all that it is not unreasonable to speculate that soon after the Budget vote, Gordhan will hit the road, and meet rating agencies, investors and the most influential people in the global political economy. He cannot do it by himself, though. Here will be the best opportunity for South Africa to excel at the two-level game in the global political economy; while Gordhan travels the world to convince investors and ratings agencies, the ruling alliance and domestic actors have to remain focused on domestic constituencies – especially the ruling alliance’s left flank.

In the broadest of brush strokes Gordhan’s task would include lowering policy uncertainty, boosting confidence and ensuring the world that the government’s most recent commitments on the economy were not a cheap trick just to buy time, or to appease markets. More crucially, Gordhan will have to convince them that the ruling alliance will keep its left flank in check.

In his response to the SONA debate, President Zuma reaffirmed government’s commitment to the National Development Plan (NDP). Herein lays the first, and probably the biggest test.

The NDP has vocal opponents in NUMSA, COSATU, the South African Communist Party (SACP) and the EFF, each one of which would prefer to see a communist society, or a combination of a Leninist-Fanonist polity. COSATU have problems with “the economy chapter” of the NDP, as do NUMSA who are also alarmed by any homologies between the Plan and policies of the Democratic Alliance – or anyone else who is not a communist.

In other words, if the plan says we must expand the economy, and the DA say we must expand the economy; or if the plan says we must professionalise the public service and the DA said we must professionalise the public service (forget that everyone might agree) NUMSA would insist that the NDP is a DA Trojan horse. Said Numsa’s Irwin Jim: “We don’t want the DA to run this country, which is why we don’t want DA policies in the national development plan.”

This reminds one of the silliness that sometimes surrounds ideas that are condemned simply because they come from Europe, or because a non-African formulated them. COSATU’s opposition seems similar to that of NUMSA; create a communist country, or you will not get our support. The EFF will reject anything the government puts forward, and will do so in the most vocal and vituperative way.

There are also sleeper cells led by people like Ebrahim Patel, who may have to be convinced that the NDP should remain the centerpiece of government policy, and Maite Nkoana-Mashabane, who have done everything in her power to denounce vital aspects of the NDP. There are, also, conspiratorial types, like Lindiwe Zulu and Tina Joemat-Pettersson, who cause problems every time they open their mouths. The problems, then, run all the way from the top, across the ruling alliance and to the left of the ANC.

Ultimately, for Pravin Gordhan, and for South Africa, the work starts on the day after the Budget speech. The Budget speech is usually the touchstone of government policy, at least for the next year. But there have been too many stop-starts over the past few years. There remains, also, a rather crude and expedient populism among the EFF, and, as we pointed out earlier this week, in President Zuma’s most basic instincts on the global political economy. Gordhan will be as successful, only, as his domestic allies will allow him to be. In this sense, someone has to watch his back. DM

Photo: South African Finance Minister Pravin Gordhan waving as he walks to deliver the 2010 budget speech in parliament, Cape Town, South Africa. EPA/NIC BOTHMA.


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