JUDITH FEBRUARY: Pressure on Mboweni to shape economic message for SA
Tito Mboweni delivers his Medium-Term Budget Policy Statement (MTBPS) on 30 October. The next few weeks will be crucial as he attempts to shape the economic message.
President Ramaphosa, for his part, has appointed an economic advisory panel to ensure that government and society are both better equipped to respond to changing economic circumstances. This was a Sona promise and, according to the statement from the Presidency, "the Council will advise the President and government more broadly, facilitating the development and implementation of economic policies that spur inclusive growth".
The council is comprised of local and international experts. Doubtless its work will traverse the territory of the nine ‘wasted years’ under former President Zuma and the depth of corruption and state capture those years wrought. Understanding the depth of the rot within the state and then dealing with it will take time.
Ramaphosa is also dealing with a state so hollowed out and weakened by corruption and state capture that delivering on the many promises he has made will be difficult.
In Tito Mboweni we have a Finance Minister who is unafraid to take on the ‘holy cows’ of retrenchment and SOE bailouts. He is well known for telling it like it is. His economic ‘blueprint’ released in late August has received a mixed response. Mboweni has famously said he is not the ‘Minister of bail-outs’.
The blueprint includes a nod to privatisation, easing of doing business regulations and an attempt to increase growth to 3% while creating a million jobs. It also included a suggestion to sell off Eskom’s coal-powered stations.
Of course, these plans almost immediately met with fierce opposition from trade union federation Cosatu.
The ANC itself has only given Mboweni partial approval for his blueprint. Much of its response has kicked the hard issues such as dealing with Eskom to touch until the MTBPS is delivered. On the labour market reform the ANC has said that the minimum wage needs to be discussed at Nedlac again.
Interestingly, despite the aversion to selling off coal-powered stations, the ANC itself has acceded that an energy mix based on the lowest cost-option is imperative. That will force renewables into our energy mix in a far more robust way. The implications for Eskom are obvious.
All of economics is also about politics and so Mboweni’s speech will be closely watched as an indicator of what the ANC’s stance is on these hard-fought economic matters. It will also be a test of Mboweni’s influence over his Cabinet colleagues, for those stand-offs are crucial too.
If Public Enterprises Minister Gordhan requests a bail-out for SOES, can Mboweni deny him and proceed with selling off some of them? It is difficult to see how this can happen without decisive intervention from their boss, the President. Therein lies the rub.
In previous, more stable post-apartheid years, the MTBPS was largely an understated affair with a few tweaks made to the Budget. The entire process is aimed at ensuring maximum Budget transparency (something for which South Africa has been renowned) and provides an overview of income and expenditure over the next three years. It was a process built on painstaking number-crunching within the National Treasury.
Any Finance Minister needs credibility, a strong revenue collection service and an equally credible National Treasury. Both Sars and National Treasury have been severely weakened over the past nine years. Edward Kieswetter, the new Sars Commissioner, has been working feverishly to rebuild the institution, but again, that will also take time. Moody’s has forecast economic growth at 0.7%, down from its original forecast of 1.3% for 2019. It remains concerned about the debt-to-GDP ratio.
This MTBPS will be delivered against a backdrop of political unease and a citizenry increasingly frustrated with the economic and political crises.
Mboweni will tell us what the revenue shortfall will be. It is estimated to be at around R50 billion given how sluggish the economy is. How will he deal with this and crucially, where will Mboweni cut expenditure? In addition, the MTBPS has to deal with wasteful and fruitless expenditure within government as a matter of urgency. Mboweni is not the minister of bailouts yet how will Eskom be fixed? The ANC’s response seems to be unhelpfully unclear and same-old when it talked again about restructuring Eskom into 3 units.
But it is not only Eskom which is a drain on the fiscus. SAA is in immediate crisis with strikes which were threatened in late September. And then there is Denel, the SABC, Prasa and a laundry list of corruption and maladministration. The state has also been painstakingly slow and ineffective in paying its suppliers, thus creating a choke on small business development.
In addition, government’s new plans on a National Health Insurance will need to be funded. Mboweni will need to provide some information and reassurance about this proposed multi-billion rand endeavour about which many questions have been asked.
South Africa talks far too much and does far too little. The time for endless discussion on economic policy must surely be over? The challenge is whether the ANC, caught in factionalism and division and addicted to the trough that is SOEs, sees this? Whether Mboweni can ignite action (and thereby the economy) depends on whether his boss Ramaphosa is able to navigate ANC divisions smartly and then take the hard decisions needed to save this economy and restore confidence after the ruinous Zuma years.
Ramaphosa has in recent days come out in support on Mboweni’s blueprint, but the devil is always in the detail. Somehow though one suspects that the MTBPS will be the start of incremental economic changes – some good, some simply helping us to limp along.
Judith February is based at the Institute for Security Studies and is also a Visiting Fellow at the Wits School of Governance. She is the author of 'Turning and turning: exploring the complexities of South Africa’s democracy' which is available. Follow her on Twitter: @judith_february