Can Gordhan survive?

2016-09-18 06:09

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Make or Break: How the Next Three Years Will Shape South Africa’s Next Three Decades by Richard Calland

Penguin Random House

208 pages


On Friday, April 15, this year, Mineral Resources Minister Mosebenzi Zwane decided that the eve of the spring meetings of the International Monetary Fund and the World Bank was the perfect moment to table a unilateral amendment to the Mining Charter that would unequivocally vanquish the “once empowered, always empowered” principle.

At the time, Finance Minister Pravin Gordhan was in Washington to promote his fiscal consolidation and structural reform initiatives.

In the prevailing climate, it was hard not to smell a rat.

Was it a deliberate attempt by some of his Cabinet colleagues, or their backers, to undermine Gordhan yet again?

Let us not forget that the Hawks dispatched their 27 questions relating to the “rogue unit” of the SA Revenue Service (Sars) days before the February 24 budget speech, a story worth reviewing here.

First, I must point out a recurring problem with President Jacob Zuma’s administration: the incoherence of its Cabinet.

Because of a lack of decisive leadership at the top, or even a kitchen cabinet with the requisite skills and capacity to fill the void around the president, Cabinet ministers are invariably free to pursue their
own agendas.

Often, the left hand does not know what the right is doing, sending confused signals to business and potential investors.

Rent-seekers have a largely open field, too.

And Zwane is associated with those rent-seekers, having been appointed in circumstances similar to those of Des van Rooyen in that Zwane’s predecessor, Ngoako Ramatlhodi, was summarily dismissed in September last year without any good reason.

Unlike Van Rooyen’s appointment a few months later, neither the ANC leadership nor business nor anyone else was able to step in and stop Zuma from acting so recklessly in appointing such a crassly obvious placeman as Zwane.

It should have set off the biggest alarm bells. It speaks volumes that it did not.

And it is hugely revealing both of the state of the ANC and its loss of control – at least at that time – over its president and of the fact that he had “gone rogue”.

Although “9/12” presented a low point from which the only way was up, and indeed a new, positive political trajectory was embarked upon, it was always clear that it would not be a linear journey; there would be a twist and a turn in the story to follow.

The first came immediately before the budget speech in which Gordhan so emphatically laid down the law, when current Sars commissioner Tom Moyane – Zuma’s man at the government tax revenue agency that had begun to close in on the president and his family and friends with its investigations – began to wage a war against Gordhan through the proxy of a bogus “investigation” by the police’s fraud unit, the Hawks.

Successor to the Scorpions, the Hawks is itself led by a dubious Zuma appointee, Lieutenant General Berning Ntlemeza, whose posting has been challenged by the Helen Suzman Foundation on the grounds that he was unlawfully appointed because he is not a “fit and proper person”.

In the short term, it will be essential to see whether Gordhan is able to withstand the various attempts to intimidate him.

By early June, Gordhan appeared to have seen off the Hawks by answering their 27 questions, thereby calling their bluff.

The questions relate to a decision to set up a specialist intelligence unit within Sars around a decade ago.

The reason – which most people will fully understand and support – was to give the agency the teeth and muscle to be able to investigate effectively, especially the most serious serial tax dodgers.

Gordhan, then Sars commissioner, appointed a former comrade from the struggle days whom he trusted to lead the unit – deputy commissioner of Sars, Ivan Pillay.

No one can really second-guess this decision. Indeed, then minister of finance Trevor Manuel signed off on the funds needed to run the unit.

However, things went a little rotten when the unit allegedly hired some old school intelligence operatives from the apartheid era who may, it is not hard to imagine, have gone about their business in, well, the style of old school intelligence operatives from the apartheid era – that is to say, with little acquaintance with, or consideration for, the law.

Allegedly, they tapped phones without permission and generally proceeded in a rogue fashion – thus earning the unit the sobriquet “rogue unit”.

The question is whether Gordhan knew enough about these operational details to be held responsible and accountable for them now. It seems unlikely. It is more likely a smoke screen for an attempt by the Zumaists to undermine and intimidate Gordhan.

But Gordhan will prevail.

Indicators of whether I am right will be that the Hawks back off; Moyane is “redeployed” within months or even weeks; and the SAA chairperson, Dudu Myeni, who is believed to be “close” to Zuma – and certainly heads his rural foundation – is removed.

Myeni was one of the reasons that former finance minister Nhlanhla Nene was summarily removed on 9/12.

Against the wishes of National Treasury, who had taken on responsibility for the government’s shareholding in SAA (a move that had a senior Treasury official wryly observing to me in early 2015 that “we now seem to be in the airline business”), Myeni sought to restructure a deal with Airbus over the lease or purchase of new aircraft.

But the main reason was nuclear power.

The thickest line in the sand that Gordhan has drawn is over Zuma’s apparent obsession with procuring nuclear power and to do so from Russian state-owned enterprise Rosatom.

Gordhan has stated very clearly that the government would not procure what it could not afford.

Zuma spent a lot of time with Russian President Vladimir Putin in the first part of 2014.

Every time I bumped into a certain National Planning Commission (NPC) commissioner at an airport or a conference, he would whisper in my ear: Find out how many times Zuma has met with Putin this year. Apparently, more than a dozen times.

Zuma personally took charge of the nuclear decision-making process on the back of the 2010 resolution – now overtaken by events, such as lower demand for electricity because of the slump in the economy and greatly reduced costs of renewable energy – to include 9 600 megawatts of nuclear power in South Africa’s future energy mix.

The decision to proceed with this was confirmed by Cabinet last year and, curiously, in a Government Gazette dated December 24, the procurement process was formally commenced, notwithstanding the fact that Treasury had not yet completed an affordability study. Merry Christmas!

The concern is not just that circumstantial evidence suggests that a massive bribe will be paid by the Russians to Zuma, and perhaps to the ANC, but that South Africa will enter into a power purchase agreement on the back of a vendor-financed capital expenditure agreement, and that the commitment to buy electricity from the (Russian) company for perhaps 20 or 30 years will lock South Africa into a price that its economy simply cannot afford.

Sources in the department of energy informed me last year that they had been told to “get the deal done, as quickly as possible, and don’t worry about the procurement rules; the presidency will provide cover”.

Thus, the nuclear procurement issue will be a huge fault line, not just for Gordhan and his credibility, but also for South Africa’s democracy and public accountability. It is one to watch very carefully over the next year.

These are smaller, though still enormously important, subquestions of a bigger one, not just for this year, but for the next three years and beyond: can Pravin push through his reform package?

The reason the answer – positive or negative – will reverberate far longer is that, as the nuclear deal question illustrates so well, there are huge economic and political implications either way.

In the shorter term, there are other questions to consider. What if Gordhan is unable to provide the rating agencies with convincing evidence that sufficient progress is being made on his reform package?

A downgrade will inevitably follow. What will the implications be?

And to return to where I began: What if there is a risk-off? Will South Africa follow Brazil into a dizzyingly disastrous downward spiral? Can the centre hold?

And, perhaps the biggest question of all: Can Gordhan make it to 2019? Because we need him to outlive Zuma politically, that much is clear.


Do you think Finance Minister Pravin Gordhan will prevail?

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Read more on:    treasury  |  sars  |  pravin ­gordhan

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