Durban - Finance Minister Pravin Gordhan was in top form on Thursday when he and Minister in the Presidency Jeff Radebe briefed the media on the special cabinet meeting on Wednesday to discuss the state of the economy and its implications for the Budget.
Gordhan has always had a knack for taking the sting out of journalists’ questions by cracking a joke or turning a question back on the questioner.
But few ministers would have dared to touch the zinger he was served, and deflected with aplomb, about the damaging effect of his boss, President Jacob Zuma’s, pronouncements on the exchange rate.
This followed the president’s musings last weekend on the response of the markets to his attempt in December to install Des van Rooyen as the new finance minister.
Some commentators interpreted the plunge in the ex-change rate on Monday as a direct response to Zuma’s view that the markets had overreacted.
But, Gordhan pointed out, there were “many complex dynamics” affecting emerging markets and it was too convenient to blame an individual.
He didn’t let Zuma off the hook, adding “what an individual does or says” might be taken into account in assessments of the currency, even if a wider set of factors were at play.
When asked from the Mother City whether the country was on the cusp of a recession, Gordhan teased, “I don’t know, is Cape Town generally depressed at the moment, is the weather bad?” before citing World Bank estimations that South Africa would average growth of 1.4 to 1.6 percent in the next three years.
That is the benefit of confidence.
Gordhan knows he is as close to being unfireable as it is possible for a minister to get.
Having been summoned to rescue Zuma from his own mess, Gordhan can now not be replaced without the same, if not a worse, “over-reaction” from the markets and society.
“I suppose you could fire him and replace him with Nhlanhla Nene,” said Professor Steven Friedman, director of the Centre for the Study of Democracy, “but beyond that you would create exactly the circumstances which his appointment was supposed to prevent.”
Spending
Friedman said the “hand-wringing” over Zuma’s comments about market over-reaction ignored the fact that what the president had to say about the Treasury was of almost no importance because he had no say over it anymore.
This makes Gordhan potentially the most powerful finance minister since democracy, as commentators have pointed out, but it also strengthens the hand of the Treasury in the fraught task of keeping tabs on government spending.
If firing Nene as finance minister was the high-water mark of attempts by “patronage politicians” to defang the Treasury and “prise open the cookie jar”, as Friedman put it, it was so spectacularly defeated it would be hard for politicians to escape Treasury scrutiny in future.
“One of the things they’ve been doing, or some have been doing, is when the Treasury is holding the line it’s difficult to do this sort of stuff on the national Budget, so you try to get in on provincial budgets and you try to get in on the parastatal budgets,” Friedman said.
This was a battle that had been playing out within the government recently, culminating in Nene’s firing.
“What happens in new systems is the limits get tested, because the limits aren’t automatic. You’re the president, you say, why do I have to put up with a finance minister who tells my friend at SAA that she can’t have her planes? Then it gets tested, and the way in which your country starts to move is determined by what happens to that test,” he said.
Zuma’s “test” had been defeated within four days, which set a precedent that could be raised whenever a similar attempt was made in the future.
That Gordhan has his sights on delinquent parastatals was clear from his briefing.
Not only did SAA have to stop relying on bailouts, he said, but it needed to turn a profit and pay dividends to the state, along with the other state-owned enterprises.
“Their reliance on the fiscus in the coming period is something we’re going to give a great deal of attention to. They must stand on their own feet.”
This is a significant step further than Nene dared to go when he declared that future bailouts would depend on the disposal of non-core assets.
“It’s clear we need to take account of the new environment we find ourselves in and make sure we tailor our expenditure and revenue decisions in line with the circumstances…”
He made it clear the preferred option would be a return to brisker economic growth, saying the government was “working hard behind the scenes to ensure we take South Africa in a different direction, that we create more optimism in our country and our economy”.
All he needs is some of his confidence to rub off on the business and investor community.
- Sunday Tribune