#MiniBudget2017: What Gigaba didn't say

2017-10-26 08:50
Malusi Gigaba

Malusi Gigaba

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As Finance Minister Malusi Gigaba was reading his budget policy statement in Parliament, the North Gauteng High Court in Pretoria was hearing arguments on whether there should be a judicial inquiry on state capture.

For his part, President Jacob Zuma, the chief patron and architect of state capture, was sleeping in Parliament. He woke up when Gigaba thanked him for his "guidance".

One of the architects of Gupta state capture, which has severely harmed the economy, is Gigaba. In his previous portfolio as minister of public enterprises, Gigaba allowed the Guptas to penetrate the boards and balance sheets of state-owned entities.  

For his role in state capture, Gigaba was promoted to the finance portfolio ostensibly to give effect to his state capture agenda. Whether he will further the state capture agenda there is another question, but the real intention of his deployment by Zuma cannot be doubted.

Gigaba delivered his inaugural medium-term budget policy statement with a cloud of credibility deficit hovering over him. But several common-sense and important points emerged from Gigaba's speech.

Leaving the horrible numbers aside, the speech contained a lot of advisory statements, all of which sounded like lecture notes drafted by advisors and directed at him to act on. It was almost as if he decided to share the notes with us, the public, instead of acting on them.

Directed at him, all the advisory notes do not correspond with his role in his previous portfolio and therefore raise doubts about whether his messages are credible. Here is the summary of some of the statements followed by what we could make of them:

Government will boost investor confidence

Except in Zimbabwe and war-ravaged countries, all governments in the world would like to boost investor confidence. Merely stating it doesn't constitute a policy or reform proposal. The issue, therefore, is how to do it.

Gigaba is seen as key to the Gupta state capture which is the single biggest concern to business and labour. Of course, it's not of concern to government. That's why Gigaba made no mention of it in his speech and no one is being prosecuted for it.

Localise procurement and encourage the private sector to do the same

It's quite a noble, though not a new, statement. But it would be interesting to know why the government didn't object to the sale of Tegeta – bought by the Guptas through taxpayers' money – to a Swiss national.

Why, in the first place, was Glencore pressured to sell the then Optimum Coal, a supplier to Eskom to the Guptas who are themselves foreigners? If Glencore was available for sale and government was instructed in transformation, Eskom would have asked black bidders to bid for the coal supplier.

If the government does not walk the talk in the conduct of its own affairs, it must forget about providing leadership to any sector.

Government will be stringent on bailouts to SEOs

Gigaba did not say why from his experience as former public enterprises minister, the SOE governance weakened dramatically. If he allowed state capture to run amok in SOEs and many of the executives in these companies are aware of his role as people were appointed after sending the CVs to Guptas, why would they take him seriously now when he suddenly preaches stringent rules? It would be helpful if the message and the credibility of the speaker reinforced each other.

Government will enforce tax compliance

Tax compliance can be enforced through implementation of enforcement measures. But these work better if tax payers are happy to volunteer to pay taxes because they feel it's less about compliance than it is about their patriotism as citizens or residents of the country.

To improve what is referred to as tax morality, you have to have a credible revenue collection agency. But under Tom Moyane SARS has assumed a reputation opposite to that which is necessary to encourage tax morality.

How, for example, does Gigaba allow Moyane to insist on clinging to the KPMG "Rogue Unit" report when the authors themselves have repudiated it and are prepared to reimburse SARS for the fees it paid for it?

Government will combat illicit outflows

Long identified as one of the many factors that undermine African economies, South Africans have seen the most graphic illicit outflows of their financial resources from state-owned enterprises to shell companies in Dubai.

Given the fact that the state owns the companies from which the money is siphoned the government should be leading in combating such illegal practices. But the government is resisting setting up a judicial commission of inquiry on state capture and has waged a war with the banks which, in compliance with their anti-money laundering legislation and international conventions, decided to close the bank accounts of the Guptas.

Gigaba cannot hope to inspire the private sector to behave ethically if there is a perception that he and Zuma actually don't mind illicit financial outflows if they benefit the president's friends.

Deal with corruption in both public and private sector

Two things have happened since state capture came to light. Firstly, all the international companies that were implicated in corruption and kick-backs, except the Chinese companies, have suspended their executives and launched investigations.

Secondly, law enforcement agencies in the US and UK have begun their investigations of their companies. From the South African government side, however, there has been no action. Gigaba's anti-corruption words are, therefore, music to the ears of the corrupt in South Africa.

The economy is still in the hands of a few – this requires radical economic transformation

There is no South African of sound mind who objects to the need to transform the economy to ensure that there is a wide ownership structure. The problem though is that the government has failed to use its levers to make this a reality. It's always raising the issue as if someone else, other than the government itself, is responsible for the failure.

This is really about the government's failure to get black people to initiate businesses which they can own and run. Instead, transformation has been used as a cover for unethical conduct in state-owned enterprises. This has led to the discrediting and cheapening of the transformation agenda.

Eskom is too important and too big to fail

If Eskom is too big to be allowed to fail, why do we allow such a monopoly to be a risk to the entire economy?

If Gigaba was serious about this concern and would have liked to minimise the risk, he would have announced a break-up of Eskom into two companies: a power generation component to compete with all power generators and an energy distributor. Experts have for years advised on this option.

While the government likes to talk radical economic transformation, it doesn't want to radically change the structure of this monopoly company. If the government can't use the companies it controls to demonstrate the value of radical economic transformation, it cannot hope to convince the private sector.

Sadly, the supposed beneficiaries of transformation, the majority of black people, become the losers.

- Mkhabela is a fellow at the Centre for the Study of Governance Innovation (GovInn) at the University of Pretoria. 

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