On Wednesday, before tabling his first budget vote in the National Assembly, Finance Minister Tito Mboweni cut a totally different figure than his immediate predecessors.
In 2017 Pravin Gordhan was under siege and warding off repeated attacks from then president Jacob Zuma while attempting to pacify sceptical financial markets. The strain showed and he used the Budget platform to rally national support.
In 2018 Malusi Gigaba was visibly crestfallen, having just lost his political patron Zuma, who had been removed after a series of strategic manouevres by President Cyril Ramaphosa. He was out of his depth and knew he was on his way out.
Both those budget votes however, in 2017 and 2018, issued the same warnings contained in Mboweni’s 2019 version. The widening budget deficit, increased debt-to-GDP ratio, tepid growth, a bloated public service wage bill, the dangers of a ratings downgrade…it was all there. South Africa is in deep, deep trouble.
Mboweni isn’t under attack from within, like Gordhan was, and he has job security, unlike Gigaba. He has the clear support of his principal and it seems as if he will be able to pick the time of his leaving. He also has the political experience and gravitas to navigate the gauntlet that is ANC ideology and internal alliance politics.
Because after signalling the Ramaphosa government’s intent – including a clamp-down on errant state-owned companies and reducing the public setor wage bill – he is going to have to gird himself for political war.
The reformation process of the South African state, initiated after Ramaphosa’s election as ANC leader at Nasrec with the installation of a new board at Eskom in January 2018, is facing resistance on all the fronts it has opened.
There are numerous public processes underway (or have been concluded) that have started to exact accountability (if not prosecutions) after years of corruption and neglect, including the inquiry into the South African Revenue Service (SARS), state capture, the Public Investment Corporation (PIC) and senior officials at the National Prosecuting Authority (NPA), while a new chief prosecutor has been appointed and a new tax commissioner will be announced soon.
Finance Minister Tito Mboweni flanked by Deputy Minister Modli Gungubele and Director General Dondi Mogajane arrive at Parliament for the 2019 Budget Speech (Photo: GCIS)
These aren’t insignificant, given the national state of affairs 12 months ago. But much of the heavy lifting is happening out of sight and out of earshot, with Ramaphosa’s reformists active on three fronts: rolling back corruption and rent-seeking in the state, stabilising and rejuvenating the economy and refitting the ANC.
The struggle to change the ANC’s culture is a monumental one, and Ramaphosa seems determined to do this concurrently with his two other major projects: the state and the economy. According to operators with insight into strategy and unfolding events, the damage caused to the ANC by the party’s presidential election campaign is severe. Whole structures, from provincial level down to branch level, have been bought or co-opted by factions who remain antagonistic to Ramaphosa. And they are not passive, they are actively organising against the ANC leader, who aims to change the culture of money for support and votes. It is a herculean task, given that the practice to lobby and buy support has now been entrenched for more than a decade.
Beyond the party’s internal strife, recovering the state and retooling the economy are Ramaphosa’s most pressing tasks – and Mboweni and Gordhan his most important allies.
During the years of state capture, National Treasury, with its constitutional mandate, adherence to rules and regulations and commitment to strict control was the rent-seeking cabal’s principal enemy. It kept a tight leash on public money, ferretted out corruption and put a brake on the nuclear deal. Zuma, as evidenced by his removal of a succession of finance ministers, considered them adverse to his project of total capture, and mounted repeated assaults on the institution.
In the post-Zuma era Treasury now seems be positioned to indeed become the “super-ministry” Zumaites like Bathabile Dlamini and Nomvula Monokyane were fearful of.
Minister of Public Enterprises Pravin Gordhan. Foto: Gallo Images / Sowetan / Masi Losi
Mboweni and Gordhan will soon appoint a “chief reconfguration officer” at Eskom, who will be responsible for ensuring that the utilty adheres to Treasury’s strict prescripts. This CRO will be “Treasury’s man” at Eskom and will look after taxpayers’ money. The minister of finance said on Wednesday that the days of free money are over and that Treasury will from now on make sure “every rand and cent” is looked after.
Eskom surely won’t be the only state-owned company to get a CRO. SAA is bankrupt, Transnet’s procurement and tendering processes are being investigated, Denel has instituted a turnaround plan and the South African Post Office is using debt to fund operations. State companies, individually and as a collective are in dire straits. According to Treasury they are all loss-making, with debt steeply rising over the last couple of years.
In order for them to remain functional, government has issued guarantees to the tune of R483bn last year, a staggeringly high amount. Just to keep the lights on and aircrafts flying.
But Treasury will now have a direct say in how these companies are managed through the deployment of CROs, which would give the department’s officials in Pretoria a direct line into daily operations. And which, in theory, should prevent overspend on expenses like diesel at Eskom.
It is going to give Treasury enormous insight to and control of entities gutted by corruption and fraud and used as cash cows for the corrupt and unscrupulous.
Gordhan is Mboweni’s perfect foil. Where the finance minister will remain in charge of disbursements, Gordhan (who as a former minister of finance and SARS commissioner knows everything about fruitless and wasteful expenditure) will be responsible to whip the companies into line.
According to Treasury’s Budget Review Eskom remains the single biggest threat to the economy due to its deteriorating debt position, that now makes up more than 15% of national debt.
Both Mboweni and Gordhan will be in charge of rescuing the parastatal and the economy through the restructuring and unbundling process.
It will be this process – an obvious precursor to wider state reforms – that will test both ministers’ resolve.
In the Budget Review, Treasury lays the groundwork for far-reaching policy adjustments, including privatisation, which Ramaphosa has already rejected. But Mboweni, ahead of his speech, wasn’t flustered when asked about Treasury’s position. He spoke of antiquated “Soviet-style” thinking and said if he had his way he’d rather spend money investing in railroads and taxis than on SAA.
According to Treasury the first priority in the reorgansiation of Eskom will be to establish an independent transmission company and adds: “In line with the president’s statement, the new company will invite the participation of strategic equity partners that will provide capital for the business and strengthen oversight.”
If indeed Mboweni and Gordhan manage to privatise a part of the transmission company, it would signal one of the most profound and consequential policy shifts under an ANC government since 1994. The party has been wholly and consistently opposed to any form of privatisation, even in the face of overwhelming business and economic advice. In fact, should Mboweni and Gordhan, under instruction from Ramaphosa, go ahead, it would be diametrically opposed to ANC policy cast in stone 29 years ago and confirmed every five years at its national conferences.
Acting SARS commissionar Mark Kingon, Deputy President David Mabuza, President Cyril Ramaphosa, Finance Minister Tito Mboweni, and Dondi Mogojane, director-general of Treasury ahead of the 2019 Budget Speech at Parliament. Photo: Presidency
The same goes for the public service: if they succeed in downsizing the huge number of government officials working in mostly inneffective and listless departments, it would equally signal a break between the ANC and a number of public service unions – unions who traditionally have been voting fodder for the governing party.
At the pre-budget press conference Mboweni had an air of confidence and resolution about him. Among the many telling statements he made, was one about government needing “to act like one”. He told gathered journalists that the members of the executive aren’t “petitioners”, meaning that not everything that they want are subject to requests. Ramaphosa’s government needs to govern, he said.
And nowhere is the imperative to govern made so explicitly clear as in the Budget document, which sets out the dire and deteriorating situation the national accounts find itself in in chapter and verse.
Ramaphosa, it is said in some circles with direct knowledge of strategy, is determined to undo the toxic effect of the previous government. He is also aware of the high political cost of enacting reforms that go against the grain of accepted ANC policy, but which has become necessary for economic survival.
Mboweni and Gordhan have been cast as his implementing agents. He will cop the political flak, and also pacify restless opponents by selling new policies under the guise of old ones, while it will be left to his outriders to do the heavy lifting. To “break the bones”, as Mboweni implored acting commissioner of SARS Mark Kingon to do with illicit cigarette traders.
There is no space and no time left. The triumvirate of Ramaphosa, Mboweni and Gordhan is going to have to make sweeping, and politically painful, decisions.