POLITICS

Smart Gordhan Boxes Clever, Restores Treasury ... For Now

Minister of Finance Pravin Gordhan played it politically smart delivering his budget speech. And that's despite the economics.

23/02/2017 08:03 SAST | Updated 23/02/2017 10:58 SAST
Mike Hutchings / Reuters
South African Finance Minister Pravin Gordhan and Deputy Finance Minister Mcebisi Jonas arrive for the 2017 Budget Speech at Parliament in Cape Town, South Africa, February 22, 2017.

ANALYSIS

Finance Minister Pravin Gordhan's seventh Budget speech on Wednesday was political, an effort to not only survive, but to reassert Treasury in a national debate dominated by rancour and rabid rhetoric.

It was a rallying point for opponents of state capture and proponents of good fiscal management, an acknowledgement that radical intervention in the economy is necessary and a rebuke of those who questioned Treasury's position in the democratic architecture of state.

Mike Hutchings / Reuters
Finance Minister Pravin Gordhan delivers his 2017 Budget Speech to Parliament in Cape Town, South Africa, February 22, 2017. REUTERS/Mike Hutchings

This budget will certainly cause pain and anger among the rich and elite -– already there are murmurings of tax revolt and divestment -– but politically Gordhan has managed to anchor himself in the Constitution, the National Development Plan and the vision of the African National Congress (ANC).

He's also managed to cast the budget as an inclusive product of Cabinet, welded together by Treasury, an institution in service of government and guided by legislation and established process and protocol.

Nothing to see here, ANC Youth League, women's league and Paid Twitter. The minister's a party man and Treasury a servant-department, was the message.

Gordhan played it smart.

The minister, as well as Mcebisi Jonas, his deputy, cut valiant and determined figures as they fronted up to the assembled media for almost 90-minutes on Wednesday morning, saying it most certainly does matter who the occupants of their offices are, that political instability does affect the work of Treasury and that they are deeply worried about a great many things.

And, Jonas said –- possibly subtweeting former Eskom CEO Brian Molefe –- politically motivated "deployments" that "fly in the face of logic" creates further turmoil at Treasury.

Gordhan received a standing ovation across party lines when he strode to the podium in the National Assembly afterwards –- with President Jacob Zuma one of the very last to stand up, and Julius Malema and his Economic Freedom Fighters among the very last to sit down.

The budget speech was lighter on economic policy and heavier on political oratory than usual. And it needed to be, because Gordhan and Treasury is engaged in a dirty battle of survival. Standing on the podium Gordhan's opponents sat to his left, but his enemies were to his right: Zuma, itching to pull the trigger on a cabinet reshuffle and ministerial colleagues actively undermining him.

The speech itself was carefully crafted, linking with and providing support to Zuma's State of the Nation Address and his notions of "radical socio-economic transformation". It however repeatedly expanded on the horrid state of public finances and hammered home the necessity of responsible fiscal stewardship.

Gordhan -– engaged in mortal combat with Zuma's pals, the Guptas –- loudly warned against the perils of "patronage" and "capture" in his speech, with Jonas adding in the press conference that corruption and cronyism hits the poorest the hardest. There were also two references to Nhlanlhla Nene, dumped by Zuma as finance minister in 2015.

It wouldn't have gone unnoticed.

It is clear that Gordhan agrees with Zuma about "radical economic transformation" ("radical" was used six times in the speech), he said during the press conference it doesn't only make economic sense but is a moral issue as well.

"The relationships between labour and capital, rich and poor, black and white, men and women, town and township, urban and rural, still reflect the entrenched legacy of colonialism and apartheid. Wealth is produced and allocated along lines that remain fundamentally unjust," Gordhan said in his speech.

"The ownership of assets and the distribution of income is captured by a minority of the population, a situation that is morally wrong and economically unsustainable."

He did however warn that this could only be achieved –- and it would have peeved paid Twitter –- by governing finances responsibly: "Let me say clearly and emphatically: sound public finances, the health of our financial institutions, investment-grade credit ratings and our competitive public procurement processes are valued elements in the sustainability and integrity of our transformation path."

Gordhan proceeded to give Zuma a framework within which this type of transformation could take place, with the words "create" and "new" featuring stronger than "regulation" and "redistribution".

Public finances are severely constrained and Gordhan had no room to manoeuvre. His tax proposals are drawing fire while critics say there simply isn't enough new ideas that will stimulate growth and tackle the gaping societal inequality. Government revenue is down while its debt is more than 50% of gross domestic product.

But Budget 2017 was -- unfortunately -- more about politics than economics.

The attacks on Gordhan and Treasury won't now abate.

He is still headed for a showdown with the Guptas in the High Court in Pretoria next month, while the spectre of a dangerous Zuma ready to deploy Molefe to 40 Church Square, Treasury's headquarters in Pretoria, remains. The narrative that Gordhan presides over a "state within a state" might have been dealt a setback, but it will be temporary, given the contested political terrain that is 2017.

When Gordhan finished his remarks at the press conference he stood up, turned around, put his right hand on Jonas' right shoulder, smiled and squeezed it. Jonas smiled back, gathering his papers.

They know what they're doing.