JUDITH FEBRUARY: Tito Mboweni’s brave wager
Ahead of Wednesday’s Budget Speech, Finance Minister Tito Mboweni tweeted a picture of himself and President Ramaphosa discussing ‘final preparations’ for his speech. They looked pretty relaxed, despite the severe economic and political strain the country faces.
In fact, just two weeks before, Ramaphosa had mentioned our "stark reality" in his State of the Nation Address (Sona).
Our public finances are under severe strain, debt as a percentage of GDP sits at over 60% and we are wrestling with a low growth, high unemployment economy.
Ramaphosa acknowledged this as he talked about the “mistakes we ourselves have made” and referenced state capture and corruption.
Mboweni was upbeat as he entered the House bearing an aloe ferox plant with quotes ranging from the Bible to Pliny the Elder.
Mboweni does seem to be irrepressibly positive in an endearing sort of way even at the worst of times. But he’s no fool. His disposition also seems to allow him the leeway to say what President Ramaphosa cannot or will not say.
As former Minister of Labour and Governor of the Reserve Bank, he knows a thing or two about the inner workings of government. He is therefore acutely aware of what needs to be done to repurpose the state, specifically National Treasury, for its democratic mandate.
Ex Africa semper aliquid novi.
We needed ‘something new’ from Mboweni given that most of the pre-Budget commentary was deathly gloomy, with forecasts of a VAT increase and hikes in personal tax. Mboweni managed to ensure a few surprises and take a few bold steps.
His Budget took place against the backdrop of low growth, a weak economy and the failure of Sars to collect sufficient revenue over successive years.
The hollowing out of Sars due to looting and corruption has serious consequences. New commissioner Edward Kieswetter is on a mission to fix the institution but it will take time.
The Davis Tax committee has been re-established "to address tax leakages, customs fraud, trade mispricing and harmful tax practices". This is all welcome news.
Mboweni also came to Parliament amid fraught politics within the party he represents. That is probably the biggest stumbling block to our collective progress - a divided and mostly unfit for purpose ANC.
The ‘drip-drip’ allegations of state capture coming out of the Zondo commission of inquiry are also a constant source of societal frustration and anger for citizens. The country has leaked money like a sieve through waste, mismanagement and corruption.
The perpetrators walk amongst us and some, like former President Zuma, have only sought to add insult to our collective injury by doing whatever he can to avoid his day in court. ‘The Year of Orange Overalls’, as Archbishop Thabo Makgoba puts it, seems very far away.
The locus of much of this looting has virtually always been via state-owned enterprises. Just about every one of them needs bailing out. But given its strategic positioning in the economy, it was Eskom that loomed large on Wednesday as it did in Ramaphosa’s Sona. The recent rolling blackouts have served to exercise all our minds on this behemoth that is R450 billion plus in debt.
Mboweni has famously said he is not the “minister of bailouts”. Last year both President Cyril Ramaphosa and the World Bank country director, Paul Noumba-Um, said Eskom was "too big to fail".
In his maiden 2019 Budget Speech, the Finance Minister did not mince his words about SOEs in general when he asked: “Isn’t it about time the country asks the question: do we still need these enterprises? If we do, can we manage them better? If we don’t need them, what should we do?”
In this 2020 speech, there were, however, bailouts of R60 billion for Eskom and SAA (for the latter, R16.4 billion for the repayment of debt and interest) over the next three years. Eskom, which was allocated R23 billion a year for the next decade in the 2019 Budget, will receive these allocations over seven years rather than 10. This means that although Eskom does not receive additional resources in the 2020 budget, it will nevertheless receive substantial support of R112 billion over the three-year budget period.
Cuts have been felt in social services such as education infrastructure, transport and human settlements. These cuts are a further reminder that state capture costs. The health budget is set to be reduced by R3.9 billion.
The much-vaunted National Health Insurance is receiving R55 million to increase capacity to phase in aspects of the NHI and a further R25 million has been allocated for the National Quality Health Improvement Plan. It is unlikely that the NHI will be implemented by 2026, despite what the President has said in the past days and despite Health Minister Zweli Mkhize pressing on with the rhetoric and concomitant plans. The harsh reality is that there simply is no money for it.
Most welcome is the proposal to publish a Procurement Bill for comment and allocate an extra R2.4 billion to the Special Investigative Unit and the Directorate for Priority Crime Investigation. This also means 800 more investigators to deal with state capture/corruption. There is urgency to this given the public agitation that arrests of those responsible for state capture be made. That requires proper preparation and investigation. That, in turn, needs resources and the right personnel. Slowly but surely we need to rebuild the institutions Zuma broke.
But the motif of this Budget - forgetting the aloe forex plant and how it stores water (which is instructive too of course) - is the brave wager that Mboweni has made.
First, he announced no VAT or personal tax increase. Hard-pressed South Africans certainly welcomed this news yesterday. It was the proverbial ‘rabbit out of the hat’ when the kitty is so bare.
But then came the really bold statement of intent on the back of Mboweni’s exhorting his colleagues to make "difficult and painful political decisions".
Chief among them is to cut public spending by R261 billion over three years. More specifically, R160 billion of that amount will come from cuts to future increases and benefits proposed for senior to middle-ranking public servants earning between R331,000 to R489,000 per annum.
And herein lies the rub.
Already, the trade unions are up in arms and the next phase of this Budget will really be negotiations within the Public Service Co-coordinating Bargaining Council.
Politically, Mboweni is a bit of an ‘outlier’. He is hardly within the inner circle of the ANC and he is an unorthodox thinker. His economic blueprint released in late August 2019 received a mixed response. It included a nod to privatisation, ease of doing business regulations and an attempt to increase growth to 3% while creating a million jobs. It also suggested selling off power utility Eskom’s coal-powered stations.
Of course, these plans almost immediately met with fierce opposition from Cosatu. Mboweni has said he has the backing of Cabinet for this Budget. That, of course, is very different to having the backing of Luthuli House and the so-called Radical Economic Transformers (read, ‘looters’) who prefer greater access to coffers to ensure looting and an unending gravy train.
Mboweni is sanguine about his chances of convincing the unions that his path really is the only way out of the hole we have found ourselves in thanks to almost a decade of state capture under Zuma.
The aloe ferox he said is “unsentimental….and it sheds dead weight”. Mboweni and his boss Ramaphosa will need to be unsentimental as they deal with what has become the most urgent priority and that is cutting public expenditure.
While the unions have declared ‘war’ and instability, the country has to brace itself and bite the bullet if we are to survive and indeed, thrive. One would not necessarily bet against Mboweni as wily as he is, but again, he needs political support to take on Mantashe and company who appear sluggish about dealing with urgent decision-making processes. In Mantashe’s case, his sluggishness relates to restructuring our energy sector.
South Africa’s socio-economic challenges are profound. Our ability to retain a cohesive society has always been tenuous. This is the case now more than ever before, with unemployment and poverty levels remaining stubbornly high. In addition, as inequality rises, our public discourse has become more toxic and marked by deep-seated anger from those who are poor and marginalised.
Zuma, the wrecking ball, is gone. Yet, we now all bear the burden of paying to fix the economy. It’s a bitter pill to swallow and will be for some time to come because there simply is no proverbial silver bullet. But if we are prepared to make the ‘difficult and painful’ political decisions Mboweni talked about, there will be some light at the end of this long, dark tunnel.
As ever in South Africa, we waft between this hope and despair. Mboweni’s Budget Speech shows us that there is no inevitability to the despair. Ramaphosa simply needs to follow Mboweni’s example and be brave.
The times demand it.
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