Mpumelelo Mkhabela | Budget not as easy as choosing pilchards over steak for dinner

2020-02-28 06:00
Lucky Star Pilchards, one of Finance Minister Tito Mboweni's staples. (Die Son)

Lucky Star Pilchards, one of Finance Minister Tito Mboweni's staples. (Die Son)

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The circumstances of Mboweni’s speech are also different to the internal politics of the governing party. Mbeki had near-complete control of the party and he was often accused of centralising power, writes Mpumelelo Mkhabela

Mangosuthu Buthelezi, the leader and MP of the Inkatha Freedom Party, has on many occasions jibed at the ANC and its alliance partners Cosatu and the South African Communist Party.

Delivering his speeches in Parliament, Buthelezi would pledge support for the government's Growth Employment and Redistribution strategy.

But he would point out to President Thabo Mbeki and Finance Minister Trevor Manuel that policy implementation was hobbled by Cosatu and the SACP.

He would then do a mock toyi-toyi, saying Cosatu and the SACP were preventing implementation by chanting, "Asiyifuni i-Gear! We don't want Gear!"

The wobbly jibe, by someone who evidently never toyi-toyed in his life, brought comic relief in the National Assembly chamber.

Buthelezi’s point was, however, overstated.

The truth is, Mbeki and Manuel implemented economic policy reforms despite strong opposition from the Left.

Fast-forward to 2020, Finance Minister Tito Mboweni delivered what could be described as "Gear Lite". The Budget doesn’t have all the characteristics of Manuel’s budget reforms, but it is nonetheless an austerity, reforms-based budget.

Manuel had no qualms talking about privatisation openly.

He would subsequently report on the benefits it brought in reducing government borrowing. It was a swear word in the left-wing circles of the ANC.

The SACP coined a derogatory term for the Mbeki-era economic reforms, describing them as the "1996 Class Project".

Adopted in 1996, Gear was seen as a declaration of war against the working class.

Ramaphosa comes across as a spectator

Gear sought, among other things, to reduce government expenditure, integrate South Africa into the world economy by abolishing exchange controls, trade liberalisation and, more importantly, to reduce government debt.

The government had to either bite the bullet or continue with an expansive fiscal policy that would have resulted in the International Monetary Fund running the government.

Mbeki was so determined to implement the policy that no amount of opposition would stop him.

And so was the Ben Okri-inspired Manuel. The consequence of the decisiveness over time was healthy public finances, budget surpluses, a growing economy and the introduction of social grants, among others.

In his speech, Mboweni briefly referred to the successes of the Mbeki-Manuel era. (Mbeki was responsible for running the business of government, even while Mandela was president).

Mboweni said: "In the 15 years following democracy, economic growth averaged 3.6% a year. The gross debt-to-GDP ratio declined from 46% to 26%. In the five years from 2003 to 2008, growth averaged around 5% and South Africa was amongst the fastest-growing major economies. The unemployment rate improved by five percentage points."

Mboweni made it clear he would like to repeat this.

But the circumstances are different.

It was clear during the Mbeki era that the reforms originated from the president himself. That strong political backing gave the finance minister and his Treasury officials cover to do their work.

This was diminished in the second half of the Jacob Zuma’s ruinous presidency.

In 2020, it seems the primary driver of public finance reforms, at least on the face of it, is Mboweni who sometimes comes across as frustrated.

President Cyril Ramaphosa comes across as merely a supporter, avoiding getting directly entangled.

Mbeki personally lobbied union leaders to support his reforms. While they complained of lack of proper consultation, some admitted that he convinced them by doing the sums.

It remains to be seen what role Ramaphosa will play after the Mboweni Budget commitments.

In his speech, the Bible-inspired Mboweni could not even mention the word he most likely would have preferred: privatisation. We know, were it up to him, he would get the quickest auctioneer for SAA.

It is precisely because the government has over the years lacked the boldness to find an alternative model for SAA that Mboweni has set aside R16.4 billion to settle government-guaranteed debt and interest on behalf of the airline.

R205bn to service debt

At the same time, and let this contrast sink in, the government will cut the human settlements budget by R14.6 billion over the next three years (R4.8 billion a year).

There is no rocket science here: it’s costly, not beneficial, to run an inefficient state-owned airline. Would Human Settlements, Water and Sanitation Minister Lindiwe Sisulu explain to desperate citizens on housing waiting lists that there won’t be as much additional housing as previously planned because of SAA?

The circumstances of Mboweni’s speech are also different to the internal politics of the governing party. Mbeki had near-complete control of the party and he was often accused of centralising power.

Not so for Ramaphosa who must contend with a secretary general and a core grouping that makes it known from time to time that they don’t agree with him.

However, during the Mbeki presidency, opposition to government policies was confined to the ANC’s alliance partners.

Despite the fact that Mboweni’s reforms in the budget are not as deep as those of the Gear period, they will be resisted by the unions that would not tolerate job losses and salary stagnation.

Mboweni wants to reduce the public sector wage bill by R160 billion in the next three years.

It is part of his clampdown on government interest expenditure, to stave off a credit-downgrade to junk by Moody’s that would make government’s borrowing costs even more expensive.

The biggest and the fastest growing government expenditure is interest on government loans. In total, the government this year will pay R205 billion to service debt.

This is estimated to increase to R290 billion in 2022/23.

The unions are arguing that workers should not be blamed and sacrificed for the bad shape of the country's public finances. Now, we'll wait for the next slogan against Mboweni, who seems ready to face them at a bargaining chamber.

Beside threatening to go on strike, will the public unions make a compelling counter-arguments to prevent Mboweni’s cuts?

Will they argue that Mboweni should instead cut more of service delivery spending, rather than the R100-billion cut he proposed?

Do public sector unions agree with the SAA unions who want to keep SAA in the sky, whatever the cost to the fiscus?

The Budget presents a dilemma to the unions.

Mboweni himself grappled with the conflicting demands.

It was not as easy as choosing pilchards over steak for dinner at Makgobaskloof.

- Mkhabela is a regular columnist for News24.



Read more on:    tito mboweni  |  cyril ramaphosa  |  trevor manuel  |  thabo mbeki  |  parliament  |  economy  |  politics  |  budget
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