Turning the SA economy around, given how low it has sunk already, cannot be done with slogans and policy statements that lack substance, credibility and moral authority on the part of those who are in charge of implementation. Much more is needed – and needed urgently.
It is safe to say that at no point since 1994 have SA citizens and its creditors had so much interest in the Minister of Finance’s budget policy statement (known as the mini-Budget) as was the case this year. The technical and political factors had combined to create a perfect political economy drama. University students and academics marching on Parliament, demanding leadership and a fair slice of the public resources, captured the reality of the national interest. For the economy, and society, of course, it is less of a drama and more of a perfect storm – one fully designed and launched at home by no other than those entrusted to safeguard the nation’s interest.
Fiscal policy and budgetary allocations are tough balancing acts even in the best of conditions. They are tough because government budget policy is the crossroad of politics, economics, finance and political ideology. This is well understood, and competent ministers of finance worldwide have no illusions about the competing moralities that they need to wrestle with.
However, in the case of Minister Gordhan in 2016, he faced exceptionally bizarre circumstances arising from the machinations and the skulduggery of the current cohort of so-called political leadership within the governing ANC alliance. As if a stagnated economy with near zero growth, a society bedeviled by widespread poverty, structural unemployment and excessive inequality, together with a disillusioned youth were not bad enough, the minister’s job was further compounded by some of his colleagues and comrades who hatched a trumped-up charge of fraud and corruption to undermine his integrity and keep him busy with the defence of his personal legacy.
In this context, the minister’s MTBPS focused on two critical and inter-related themes: one was the imperative of turning the economy around, raising long-term investment in the key sectors of the economy, and reviving confidence in the country and its governance, building upon the collaborative national enterprise. The other was the role of politics within his government and broader political leadership in serving the national interest.
Mindful of the fact that the country’s investment grade credit rating is held precariously on a knife edge, the National Treasury had done a decent job of balancing competing interests, offering a medium-term strategy that, if pursued, might just be convincing enough to avert a junk-status downgrade – at least as far as fiscal considerations are concerned. That said, it is abundantly clear that unless and until the economy is revived and put back on a sustainable growth path, no amount of fiscal gymnastics is likely to rescue the country and its global investment rating. This is a simple fact that the government has failed to grasp since 2008. Instead, it has continuously used the unfavourable global conditions to avoid making tough decisions on some of the key structural policies that have grounded the economy, hollowed out confidence and compounded the legacy of social ills of the past.
But turning the SA economy around, given how low it has sunk already, cannot be done with slogans and policy statements that lack substance, credibility and moral authority on the part of those who are in charge of implementation. Much more is needed – and needed urgently.
It is by now evident that since 2009, the government’s “statist tenor”, wrapped in the rubric of “developmental state”, has led to the twin evils of economic decline and the rise of patrimonial governance. The former has sidelined the private sector, discouraged domestic and foreign fixed investments, and has resulted in the slide towards zero growth. The latter, in the meantime, has spread corruption and the abuse of the procurement processes right across the public sector, both in government and within the State Owned Enterprises (SOEs).
Billions upon billions have been extracted from the resource base of the public sector, some connected individuals have become overnight millionaires while the poor and the working class have paid the price – unemployment has risen and poverty has worsened.
In effect, the extracted and/or abused funds were all borrowed money which contributed to the growth of the SA government debt from a low of 28% of the GDP in 2008 to the current level of almost 47%. And public debt service charges have become the fastest growing item of the National Budget.
If not arrested, this is a sure recipe for landing in a debt-trap, loss of fiscal sovereignty and the imposition of a painful, if not destructive, structural adjustment.
A decade of such practices has also corrupted the ethos of public sector administration, has cultivated a culture of mediocracy in the technocratic echelon of government departments, undermined some of the key institutions of governance, and promoted the rise of predatory political leadership in cahoots with their crony capitalists.
No economy can survive such ideology, or can cope with such governance practices – not in the age of digital technology and instantaneous access to information. Modern economies require better skilled staff, more nimble policymakers, highly robust and capable institutions, and above all ethical leadership both in the public and the private sectors. So, as Minister Gordhan put it: “It is all up to us.”
The other half of the minister’s MTBPS statement was focused on the prevailing politics of the governing ANC alliance. Borrowing from Amilcar Cabral’s words, he underscored “.. the struggle against our own weaknesses… the most difficult struggle for the present and the future of our people…”.
In this regard he could only become philosophical, spiritual and poetic. Given that the ANC’s broken house is a matter of common knowledge, he lamented the fact that “Lions that fail to work as a team will struggle to bring down even a limping buffalo.” Given that fiscal policy and budgetary resource allocation are primarily about the electorate and specifically the supporters of the governing party, Minister Gordhan was talking directly to those who wonder why the government cannot get the basics right. Why policies are not implemented – be they the NDP or the 9-point Plan of President Zuma’s State of the Nation Address?
The Cabinet, the minister was saying, is the divided house; the members spend much time and devote much energy and public resources in doing their own things, pursuing their partisan interests, and in the process second-guessing each other, plotting to undermine their own comrades, and using their line-function ministries to subvert the national interest – some by commission and others by omission. His plea for policy co-ordination, synchronisation and focused implementation was indeed revealing, and a confirmation of what is generally known in any case.
By blending the above two themes, Minister Gordhan presented an MTBPS that was technically coherent, and politically astute. He came across as “presidential”, and the standing ovation by all parliamentarians for him conveyed a message of non-partisan support seldom experienced in the degenerating milieu of our Parliament in recent years. Whether his message was heard by the president and some of his fellow Cabinet ministers, and by the machine politicians within the ANC alliance, we will soon see. DM
Iraj Abedian, CE: Iraj holds a PhD in economics from Simon Fraser University, Canada. He was professor of economics at University of Cape Town (UCT) before joining Standard Bank as Group Chief Economist in 2000. He was extensively involved in economic and financial policy as well as institutional restructuring of South Africas public policy after 1994. In 2005, he founded Pan-African Capital Holdings (Pty) Ltd. In addition to growing the companys investment portfolio, Iraj was centrally involved in the conceptualisation and capital raising for a KZN Infrastructure Growth Fund (R1,5 billion), and the establishment of South Africas first environmental clean tech Fund (US$ 94 million fund), as well as the design and establishment of a housing finance fund called Housing Investment Partners (HiP). Within the Pan-African Capital group, he has helped establish two private equity funds, totalling R650 million. Iraj currently serves as a non-executive director on the board of Munich Re of Africa and Capital Fund Properties Ltd. He maintains an active interest in public policy discourse (macroeconomic policy, mining policy and infrastructure finance) and is an extraordinary professor of economics at Graduate School of Business Sciences (GIBS) of University of Pretoria. Over the past five years, he has also served as a member of the National Spiritual Assembly of the Bahais of South Africa- a not-for-profit religious body with focus on the promotion of spirituality within the society at large.
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.