There are some facts that are difficult to get away from regardless of how eloquent a speech may be delivered when Finance Minister Malusi Gigaba takes the speakers’ podium in the National Assembly some time just after 14:00 on Wednesday.
The economy is in the doldrums: the World Bank in September slashed economic growth to 0.6% from a smidgen above 1%, a downward trend echoed by the South African Reserve Bank (SARB). Fragile, fraught, unstable – those are words frequently used to describe South Africa’s economy. A downgrade to junk status on all fronts, not just on foreign debt, is hovering close. If that happens, the cost of borrowing for all South Africans, regardless of income or social status, will rise.
Five years after the National Development Plan (NDP) was adopted as the country’s blueprint to reduce poverty, inequality and unemployment, the required economic growth rate of 5% plus remains elusive.
Also elusive is employment. Joblessness in the first quarter of 2017 between April and June rose to its highest level since 2003 – 27.7% on the narrow definition, according to Statistics South Africa. Held by many in civil society and trade unions to be more reflective of the dire unemployment situation is the expanded definition that includes those who have given up ever finding a job, which puts joblessness at 36.4%. That’s just over nine million people who want to work, but can’t find a job.
While government may create tens of thousands of community and public works programme employment opportunities, these are temporary and do not change the structural patterns of unemployment.
Also on the back foot is reducing poverty and inequality. More South Africans are in dire poverty than in 2011, according to Statistics South Africa. Its “Poverty trends in South Africa: an examination of absolute poverty between 2006 and 2015” showed 30.4-million of South Africa’s 55-million citizens in 2015 lived in poverty, below R992 per person per month, or three million more people than in 2011. One in seven South Africans (13.4%) suffers extreme food poverty, or survives on R441 or less per person per month – effectively a decline to levels last seen in 2007 – according to the Statistics South Africa report.
According to the NDP and its plotted trajectory to reduce poverty, unemployment and inequality by 2030, these figures should be nowhere near as devastating. And while 17-million South Africans rely on social grants to stave off starvation, price hikes on food, petrol and electricity have put consumers across class and race and gender under severe pressure.
The South African Revenue Services (SARS), caught up in the KPMG and so-called rogue unit saga, has slipped up and failed its collection targets of taxes, including excise and custom duties and VAT. By SARS’ own account to Parliament’s finance committee, the tax collector missed its target by R13.1-billion as of the end of June 2017. Economists speculate that the figure could be as high as R40-billion.
While government for years has talked of the developmental state, and leveraging its SoEs particularly in its much touted R1-trillion infrastructure build programme, a number of key entities are troubled by financial and governance mismanagement. While opposition parties like the DA are calling on government to privatise SoEs or at least unbundle them, this is not a politically palatable solution for the governing ANC.
The broke SABC – it now finally has a board, but still only acting executives – needs R3-billion, it recently emerged in Parliament’s finance committee. The South African Post Office has managed to reduce its losses, but still remains almost a billion rand in the red. Also in need of cash is PetroSA, while the Strategic Fuel Fund’s controversial sale of domestic oil stocks has presented a potential bill of billions of rand to the national coffers for those stocks to be replenished.
The Passenger Rail Authority of South Africa (Prasa) also needs money; how much is not clear because it did not file its annual financial statements, in the absence of a board. The last board under chairperson Popo Molefe was fired in March 2017 as it was briefing MPs, including on irregular expenditure amounting to R13.9-billion for the 2015/16 financial year. The new, but interim, board was appointed only earlier this month. Transnet, under scrutiny for a multibillion-rand locomotive contract with a Chinese company including consultancy fees to a Gupta-linked company, is also thought to need cash. Transnet’s irregular expenditure ballooned from R25.1-million in the 2015/16 financial year to R922.5-million a year later, according to a presentation to MPs by the Office of the Auditor-General, the Chapter 9 institution established in the Constitution to support democracy.
Eskom, central to the State Capture claims particularly over a series of coal supply deals with Gupta-linked company Tegeta, is understood to need R30-billion to keep going. The power utility’s irregular expenditure has sky-rocketed to just over R4-billion in the 2016/17 financial year, up from a mere R106-million a year earlier, according to the Auditor-General, the Chapter 9 institution established in the Constitution to support democracy. There’s been a revolving door of board members and Eskom executives, some on suspension, contributing to general governance instability, although Public Enterprises Minister Lynne Brown recently publicly indicated she was hoping to have a permanent board in place next month.
And then there’s SAA. The national airline was bailed out to the tune of R5.2-billion from taxpayers’ money paid to the National Revenue Fund. If those payments to lenders, which declined to extend or roll over loans, had not happened between the end of June and September, it would have triggered a complex cross-default call-in of other loans against government guarantees extended to other SOEs, including Eskom which has the largest slice at R350-billion of such government guarantees.
Recent board changes – chairperson Dudu Myeni, who is also chair of the Jacob Zuma Foundation, who has been widely seen as an obstacle, is out as of 3 November when SAA holds its annual general meeting – have been welcomed alongside the appointment of a permanent CEO. But plain sailing is not guaranteed. Another R10-billion is needed to keep the national airline in the air.
The nuclear build programme is also one to watch. Some R200-million was allocated for “preparatory work”, but the heat was stepped up when last week’s Cabinet reshuffle moved David Mahlobo to the energy portfolio from state security, where he proved himself a close ally to President Jacob Zuma. And Mahlobo did not take long to place nuclear firmly into South Africa’s energy mix, and not with the usual government mantra of nuclear at a scale and pace the country can afford. “South Africa recognises the role of nuclear power in ensuring security of energy supply and meeting the challenge of climate change. We promote an energy mix of coal, gas, renewables and nuclear. Each of these options has their role…” he told the Africa Oil and Gas conference on Monday.
The bottom line? There’s less money coming into the national purse as demands are up. There are few options to raise money elsewhere as the sale of government’s Telkom shares mooted in August by Cabinet, and leaked by DA MP Alf Lees, is a bitter political pill, given that it would cost government an annual R800-million dividend income. All this happens against the backdrop of political factional noise in the governing ANC ahead of its December national elective conference that is closely watched by investors, economists and others both locally and internationally.
On Wednesday Gigaba somehow must find money for departmental adjustments, and indicate how the bigger picture of fiscal haemorrhaging would be dealt with in coming months. He must placate international and domestic concerns about policy uncertainty, political machinations, and install confidence that there is a workable plan to tackle South Africa’s structural inequality to benefit all, not only a few politically connected individuals, while also holding the line of fiscal prudence. Given the present socio-economic dire straights, and ongoing revelations of the #GuptaLeaks, will reassuring pretty words be enough?
Gigaba is deeply political, and keenly attuned to the factional battles in the governing ANC and the radical economic transformation proxy battles. Appointed deputy home affairs minister in 2004, he’s been a rising political star in Zuma’s Cabinet since November 2010 when he was appointed public enterprises minister, moved in May 2014 to home affairs and finally in the controversial March midnight reshuffle to finance.
In his first media briefing as Finance Minister on 1 April, Gigaba showcased the radical economic transformation rhetoric. “For too long there has been a narrative or perception around Treasury that it belongs primarily and exclusively to ‘orthodox’ economists, big business, powerful interests and international investors. With respect, this is a people’s government,” Gigaba said then, with the briefest of nods to the inclusive growth for all approach of his predecessor, the widely and well-respected Pravin Gordhan. “Like the nation as a whole and government itself, the National Treasury does not exist for the exclusive use and benefit of some with power and vested interests. From Sandton and Alexandra, Stellenbosch and Khayelitsha, and everywhere in our beloved country, we need to find ourselves.”
The pushback was almost immediate, and clear: that’s not the tone expected from a finance minister in a troubled economy under the whip of political machinations. And so the tone and language changed – towards fiscal prudence, spending ceilings and cutting government inefficiencies.
Gigaba appeared to have learnt lessons, and learnt them quickly. His maiden MTBPS will show his mettle. For South Africa, much is at stake. DM
Photo: Then Home Affairs Minister Malusi Gigaba hands over birth certificates to newly born children at Baragwanath Hospital in Soweto during the Early Birth Registration campaign in partnership with Procter and Gamble. 02/12/2016 Photo: Kopano Tlape GCIS
In other news...
July 18 marks Nelson Mandela day. All over the country, South African citizens devote 67 minutes to charitable causes in memory of Madiba. It's a great initiative and one of those few occasions in South Africa where we come together as a nation in pursuit of a common cause. An annual 67 minutes isn't going to cut it though.
In the words of Madiba: "A critical, independent and investigative free press is the lifeblood of any democracy."
Every day Daily Maverick investigates and exposes the deep rot of state capture and corruption but we need your help. Without our readers' support we simply won't survive. We created Maverick Insider as a membership platform where our readers can become part of our community while ensuring that we can keep doing the investigations that we do and, crucially, that our articles remain free to everyone that reads them. Sign up to Maverick Insider this Mandela Month and make that meaningful contribution last longer than 67 minutes.For whatever amount you choose, you can support Daily Maverick and it only takes a minute.
Bladerunner (1980s version) is a visual feast due in large part to the Hollywood Actors Strike. This allowed the designers an extra three months to refine the sets and props.