Allister Sparks

Bullet-proof Gordhan can stop the economic rot

2016-01-21 08:22

Allister Sparks

By a fortuitous twist of fate President Jacob Zuma's reckless firing of Nhlanhla Nene as Minister of Finance has landed the capable Pravin Gordham in the most powerful position in the government. One can only hope he will seize this unexpected opportunity to begin fixing the economic mess in which Zuma has landed our country.

It remains a dark secret what prompted Zuma to take that crazy decision. All we know is that he acted alone, without consulting his Cabinet or even the Minister in the Presidency, Jeff Radebe. As his Cabinet colleagues have noted, Zuma "exercised his presidential pererogative" and acted on his own. Which means, of course, that he must accept sole responsibility for the dire economic damage he has caused.

It seems clear Zuma acted out of pique at Nene's refusal to approve his "close friend" Dudu Myeni's plan to cut a deal to acquire new Airbus planes for South African Airways (SAA), of which she is chairperson. But what we don't know is what exactly that deal was that its cancellation so enraged the president. Was a third party involved? What did Nene see in it that he considered unacceptable?

We don't know. But I have a strong feeling Gordhan does. Which, if I am right, means he has a political bombshell in his hands which he can detonate any time he feels threatened or is frustrated in his attempts to do what he undoubtedly  knows needs to be done.

Add to that the fact that Zuma dare not commit a second folly by dismissing Gordhan right after firing Nene. That would be suicidal. So for the short to medium term -- certainly until after this year's local-government elections -- Gordhan is untouchable. Or, as one colleague puts it more graphically, he is bullet-proof.

That is what puts Gordhan in this uniquely powerful position. As Minister of Finance in a country plunged into a deep economic crisis, he can call the shots and do whatever he considers necessary. And his first opportunity to start doing so will come when he delivers his budget in four weeks time.

What can and should Gordhan do?

As Finance Minister he doesn't have the power to change policies. But he does control the budgets of every state department and, more importantly, of all state-owned enterprises. Here is where he can wade in with a butcher's knife and slice away the heavy layers of fat and patronage that have accumulated over the last 15 years.

To begin with, Gordhan could begin his budget speech on February 24 by reinforcing all the key messages he delivered at his media conference right after his appointment on December 14: "We will be sticking to sound financial management," he said then. . . "Our expenditure ceiling is sacrosanct. . .We can have extra expenditure only if we take in extra revenue . . . We will have no projects that we cannot afford. . . We will stabilise our debt."

So goodbye Zuma's fancy nuclear deal with Russia's Vladimir Putin if we can't afford it. Goodbye all unnecessary expendure of the kind the auditor-general finds every year. Goodbye patronage deals, of which I suspect the Airbus proposition was one.

It is in the state-owned enterprises, all of which now fall under Gordhan, where the main fat lies. The message must be stark: No more bail-outs; these SOEs must either be properly run and put on a sound financial footing, or they will be sold off in whole or in part.

Beginning with the national airline, which now has to report directly to Gordhan. To begin with there must be a clean-out of the old board and a new one, free of all political connections, installed. At which point it should be clear even to a layperson that the sensible course would be to group all three airline entities -- SAA, Mango and Air Link -- into a single company which would then have either to prove its viability or be sold off, either wholly or partly, to private operators.

With millions of our people now facing penury instead of the "better life for all" they were promised, we cannot continue wasting vast sums of public money on unviable enterprises that benefit only a chosen few who run them.

Which means our National Oil Company, Petro SA, should be shut down immediately. This hugely expensive gas-to-oil project, based on some gas findings near Mossel Bay, is a relic of the apartheid era that has now become a symbol of the Zuma era's economic ineptitude.

P W Botha, panicking at the threat of an oil boycott, launched the project in the face of warnings from all the consulting companies that there was not enough gas to sustain it for any length of time and that it was bound to become a white elephant.

The Zuma administration, in its obsession with state ownership,  has kept it going despite its huge losses and the fact that the gas is expected to run out next year. The project barely produces anything, while a series of ineffective executives continue to draw huge salaries for doing very little. Petro SA lost R14,6-bn in 2014 and the deficit us set to grow. It Must Fall.

Then there is Eskom, hopelessly behind schedule with its Medupi and Kusile power stations, choking off the industrial economy with its inadequate and increasingly expensive provision of electricity to the nation. This vast organisation, overstaffed and underperforming, is probably the greatest single drag on our economy.

Again, there is too much fat and too much patronage, with average salaries running at R500,000 a year. According to informants close to the organisation, Eskom is overrunning its costs by as much as 25 percent. Its wage bill must be trimmed and its output supplemented by private generating companies.

Not least, Gordhan will have to crack down on any excessive wage demands from the public service unions, which is pretty well all that is left of Cosatu. None of this will be a palatable job for the Minister, but it is what the country needs and what we look to him to achieve.

What we don't need is another round of discussions between government, business and organised labour to reach agreement on how to stabilise the economy and build confidence, such as Minister Radebe suggested the other day. Please, no. Investors, at home and abroad, are sick of these talk shops that lead nowhere. They have become a standard tactic of the Zuma administration to avoid decision-making, just as it uses commissions of inquiry to avoid accountability.

We already have three such plans to put South Africa back on the path to growth: Trevor Manuel's National Development Plan, Rob Davies's Industrial Policy Action Plan, and Ebrahim Patel's New Growth Path. All gathering dust on a shelf somewhere in Zuma's office.

No, the crisis that this and other columns have been warning about for several years is now upon us. It is time for action, not more empty verbiage. And Pravin Gordhan is in a position to provide that action. If he does, the investors will sit up and take notice.

News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.



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