Graft tap will be closed

2013-03-03 10:00

Finance minister takes charge of state purchases where corrupt activities can take place, writes Ferial Haffajee

I put it to Finance Minister Pravin Gordhan that while fighting corruption was one theme of his budget speech, he can’t win because of rampant impunity.

For example, this week the Sowetan newspaper reported that the Limpopo provincial police commissioner, Simon Mpembe, had blown almost R1 million spray-painting his BMW from white to black.

This allegedly because he could not wait for the right colour wheels.

Gordhan responds in shock and says: “What?” (He hadn’t read the article.)

He then tells his executives to “stop that right now”.

They scramble to get more information about the expensive paint job.

But when I suggest the R243 million upgrade of the private presidential estate at Nkandla is part of the same pattern of impunity, Gordhan says he can’t comment, pending the outcome of inquiries by the Public Protector as well as the Auditor-General.

A part of me wished he had said “stop that right now”, too, but the pharmacist-turned-activist and now respected finance minister is a politician after all, and a good one.

“They (the paint job and Nkandla) are relatively small symbols. I think (the money spent on) ministerial houses... (it’s) absolutely mad to engage in that kind of expenditure. We have not reached a tipping point, but what we need is a collective push-back so impunity does not set in,” he says.

An analyst estimates the value of corruption to be the same as that of the budget deficit.

Gordhan does the calculation quickly (it’s about R150 billion), and scoffs.

Then he runs through the budget like it’s a household money tally and says the state’s procurement budget is R420 billion.

“Even 10% of that is not possible,” he says, adding that it is possible to build social opprobrium against corruption as the country built tax compliance into a positive value.

“In the late 1990s, at golf, braais and dinners, businessmen would show off about their latest tax dodge,” the minister says.

It doesn’t happen now and Gordhan believes the state must look at how tax compliance as a national culture was built to see how society can promote an intolerance of corruption.

“We must ask serious questions of people who drive cars and buy houses they can’t afford,” he says.

Gordhan has established a chief procurement office inside the Treasury.

His executive, Kenneth Brown, takes on the job of chief procurement officer soon and they will build a crack team to focus on stopping the leakage of public funds.

The first task will be to synchronise the databases of the SA Revenue Service with the procurement office to pick up when companies that win state contracts are not tax compliant.

In the budget, Gordhan announced they are already tracking 1 000 companies.

Gordhan says that, together with Health Minister Aaron Motsoaledi, they have overhauled how the state buys antiretroviral drugs and saved R4 billion in the process.

Later, his spokesperson Jabulani Sikhakhane sends me a list of all purchases to be centralised.

It runs the gamut: from toilet paper and rapid HIV test kits to vehicle purchases and aircraft rentals.

Basically, all the purchases between businesses contracting with the state and civil servants in which grand and small corruption may happen is being centralised under Gordhan.

There will be an outcry when this tap is turned off, but with 39 years in politics under his belt, Gordhan doesn’t seem too fazed.

The 2013 budget in this current global economy was a feat.

Gordhan managed to keep the tax rate steady at the upper end while giving tax relief to working and middle class people.

Spending was cut marginally and the contingency reserve was reduced to produce an outcome that won no hurrahs but was nowhere near the worst-case scenarios expected.

But taxes are likely to rise eventually, though the final decision will be the work of Judge Dennis Davis, who has been appointed to head the country’s second major tax commission since the end of apartheid.

While Michael Katz, who headed the first, is a corporate man, Davis is from the left and has a historic soft spot for socioeconomic rights.

The choice is strategic but uncontroversial because he is an excellent judge who also heads the Competition Tribunal.

Gordhan expects to be able to offer more direction on tax by the time the medium-term budget policy statement is tabled.

If you listened carefully this week, there was another strand running through the national budget.

That is, business must come to the party.

Most (70%) economic spending lies in the private sector, with the rest in the state.

I ask if he thinks business is conservative and risk-averse.

He replies, saying: “Let’s put it politely. What we require is a recalibration of risk and opportunity.

Business must play a leading role in investment.”

One can tell that it’s a role-play Gordhan is not comfortable with when asked what he would invest in if he were a CEO.

But he has a go, saying: “Opportunity areas are in mining services, agriculture, telecoms and the financial sector.

They all have footprints in many African countries.”

The budget makes it easier for South African multinational firms to make themselves the hub of pan-African operations.

Gordhan is clearly passionate about and more comfortable in the role of political leader.

The role-play stops abruptly.

“Perhaps there is not enough communication,” he ponders, “on the need for patience with our history (and its outcome), and the sense of urgency. We’ve come a long way, but there is still a need for solidarity and sacrifice.”

The extension of a social safety net to more than 16 million South Africans, rising to 17 million over the medium term, is an example of solidarity; but the third budget theme was on the need to begin weaning ourselves off this.

There are only about six million income-tax payers, though Gordhan was at pains, during a breakfast hosted by FNB on Friday morning, to point out that everyone pays tax via VAT.

The notion, he says, that a largely white tax base was supporting a largely black base of social welfare grantees was wrong.

His politics lies in the philosophy of solidarity and restitution for apartheid, sadly a politics of diminishing currency in the South African mainstream.

“The emphasis now must shift to jobs, investment and growth. To the dignity of a job, the dignity of your own self-worth (and) the dignity of earning your own income,” he says.

In his speech, Gordhan again attempted to put his wage incentive for the country’s army of 3 million jobless young people on the table for the third year running.

The simple step of risk-sharing between business and government by allowing a tax clawback if you give a job to a youngster is mired in the Bermuda Triangle of Nedlac, where business, labour and the community sector negotiate the future economy.

I suggest to the minister that a national wage subsidy may not happen since Economic Development Minister Ebrahim Patel said, a fortnight ago, that incentives would be paid in a limited set of industries where job displacement of older, unionised workforces was no threat.

Gordhan does not comment and instead deflects to the “package” of measures set forth in a youth employment accord, which was expected to be signed by the end of last month.

With a rising budget deficit, will we run out of money and have to evolve from Gordhan’s penchant for “fiscal haircuts” (a common ministerial term when he wants greater care with public money) to a full “chiskop”?

Gordhan responds, saying: “We will not have austerity in South Africa.

The real issue is not the rate of growth, (it) is the efficiency of spending and the qualify of output – being able to do more with less.”

Slicing the tax pie

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