Wednesday is a Rubicon moment for the Exchequer. In his pedagogic style, Finance Minister Titio Mboweni will lecture to all listening South Africans how our sovereign wealth is transferred into the Fund, just like Saudi Arabia. Photo: Phando Jikelo/African News Agency (ANA)
Wednesday is a Rubicon moment for the Exchequer. In his pedagogic style, Finance Minister Titio Mboweni will lecture to all listening South Africans how our sovereign wealth is transferred into the Fund, just like Saudi Arabia. Photo: Phando Jikelo/African News Agency (ANA)

Editor's Note: Mboweni is facing his Rubicon moment

By Adri Senekal de Wet Time of article published Feb 24, 2020

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Cape Town – Within the context of the current economic crisis, Minister Tito Mboweni has the best job among his equals.

Just by definition, the many attributes of this round of crisis include a bloated public service bill, a perverted tender system that promotes unbridled corruption and the lack of economic growth. There could be many others, big and small, but the aforementioned topics command a significant public profile and, in many ways, lie within the remit of the minister to correct.

This leads then to the inquiry why is the minister’s job is the best among his Cabinet colleagues, or for that matter, since the advent of democracy in 1994. Assuming the reins of the Treasury, having been the eighth Governor of the Reserve Bank, Mboweni brings enormous leverage into his job, with his understanding of both the mechanics of finance and the architecture of our macro economy overall.

This makes him uniquely qualified above his peers, not to mention the fact that this bestows upon him the rarest achievement of being the only South African who became a governor and a minister of finance in two different administrations.

The conversation about the bloated public purse is an interesting one.

To all rational South Africans, it is the easiest subject to discuss, but among analysts, it is the most complex and politically sensitive topic to ever engage in.

Between the sophistry of the analysts and the pragmatism of rational people, however, Mboweni is the best arbiter to bridge that divide.

When a president promises in his maiden speech the amalgamation of ministries and the reduction of the size of the bureaucracy, that responsibility is reposed on Treasury, even though it feels like a Public Service Administration task.

The inability of the administration to carry it out creates the lie as a cloth which Mboweni must wear as he presents his Budget speech on Wednesday.

As for the tender system, it is the grim reality of our times that the cost of white-collar corruption is, on an extended definition, R120 billion every year. The greatest facilitator of this menace is the tendering process. There are other devious ways to achieve corrupt objectives. But those ways tend to fall in the jurisdiction of prosecutorial authorities.

To be sure, there is nothing wrong about tendering, especially in the absence of tried and tested alternatives. However, the two most objectionable facets of our tendering system are first the ease with which they can be perverted.

And second, the attending consequences or lack of them, if they are. Any saving of that whopping white-collar corruption bill can build for our yearning youth good physical schools in the vast territories of our rural margins.

By the way, taking leaf from the genius of Mboweni’s initiative which was ably articulated in his maiden mid-term budget policy review, whereat he sought to utilise the consummate skill of our military corps of engineers to fix the Vaal river affluent reticulation system, he can build us schools without the whiff of that overpowering stench of corruption.

As we enter the labyrinths of the macroeconomy, the parallel of a big funnel commands our attention. Accounting for all the economic actors that generate taxable revenue, we imagine that every department of state responsible for each of the sectors is an agent to create the opportunity for taxation. So all the tax-generated courses through a funnel that channels the flow on to the sieve that is the Treasury.

With the growth of economic activities, the size of the funnel must accordingly grow. Yet in these lean times, the funnel used for the purpose seems imperfect for the task. A new funnel must be designed.

Enter the Treasury. Mboweni has got three prongs of responsibilities in these times. First, he must be the keeper of the ground rules of what activity must generate the income that goes into the funnel. Second, no matter the political expediency of keeping many or few ministries and the reporting departments, his job is to keep the country’s eye on the money, how we make it, how we receive it, and how we spend it.

With the advent of new initiatives, a fourth dimension hs been added to Mboweni’s tasks. That dimension is something South Africans have missed since 1886 with the discovery of gold. Simply put, it is to keep the economic value of being endowed with natural wealth concentrated in a defined statutory fund. Having announced it himself, he has two big instruments to accomplish it.

For one he has got a Sovereign Wealth Fund where he is expected to quickly harness all our surface and below surface wealth for the benefit of future generations.

The ability to calculate what all that value is, lies with the affable keeper of our sovereign wealth, the Honourable G Mantashe.

Working in unison, both of them will tell South Africans in a language they can understand how much sovereign wealth we own and what its true value is.

Wednesday is a Rubicon moment for the Exchequer. In his pedagogic style, he will lecture to all listening South Africans how our sovereign wealth is transferred into the Fund, just like Saudi Arabia.

Whatever money the Fund makes as we have come to understand, will go straight to the State Bank.

But the Honourable Minister has an advantage which no one can dispute. And this is that, as Parliament appropriates budget it will be kept in the proposed State Bank.

Also, the SARB - which is not a commercial bank - holds a lot of sovereign wealth and liquid assets that should go into the State Bank.

It is not unreasonable therefore to conclude that the State Bank is conceptionally wealthy before it is even established, and that is an advantage.

The only thing this bank should NOT do is to become a commercial bank, nor compete with established ones. Not unlike the Chinese Development Bank, the State Bank must lend money to commercial banks.

In the process, it should have no dealings directly with private individuals which will render it vulnerable to capture by private interests.

Every false political promise contributes a strand of tapestry to the cloth of lies only the minister of finance can wear.

As he enters on Wednesday, he has a stark choice between bedazzling us with indigenous flora or wearing a Superman cape of political lies.

Wednesday is his moment.

* Adri Senekal de Wet is executive editor of Business Report.

BUSINESS REPORT

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