POLITICS

Treasury Officials Fear What The Economic Future Holds Under Gigaba

Public servants at Treasury mourn the political assassination of Pravin Gordhan, but are determined to “stand firm”.

02/04/2017 14:39 SAST | Updated 03/04/2017 11:04 SAST
Siphiwe Sibeko / Reuters
South Africa's new finance minister, Malusi Gigaba.

ANALYSIS

Fear and uncertainty surrounds what impact new finance minister Malusi Gigaba will have on South Africa's standing in the global economy, two senior figures in the Treasury told The Huffington Post South Africa on Saturday.

Gigaba will have the opportunity to alter the trajectory and approach of National Treasury when the next budgeting cycle starts in a month's time.

Although the new political leadership has been deployed with a specific mandate from President Jacob Zuma, senior Treasury officials say "there is enough momentum in the system" to ensure that the ship stays on course for the foreseeable future.

Treasury officials are "emotional" but "determined to stand firm" a source, who was intimately involved in fired Finance Minister Pravin Gordhan's strategy, told HuffPost SA. Another senior official said "morale is low" but staff will continue in Treasury's "tradition of excellence".

Fears swirling at 40 Church Square, where Gordhan packed up his office on Friday afternoon and where Gigaba moved in on Saturday morning, revolve around:

  • Altered and overtly political spending priorities;
  • Increased political interventions in bureaucratic functions; and
  • South Africa's credibility and integrity with international investor and bond markets.

Gigaba addressed his first press conference as finance minister on Saturday to calm fears, and asked for critics to give him a chance, saying he would put the country first. The former minister of home affairs emphasised radical economic transformation throughout the speech.

"Radical economic transformation is about changing the structure of the economy to bring in as many people as possible, but everything will be done within the fiscal constraints we have set ourselves," said Gigaba in Pretoria on Saturday. "The policy has been agreed to by Cabinet. They are collective decisions. We will use government's vast procurement budget to encourage black ownership."

He also referred to "maintaining an investment grade credit rating for South Africa, by all credible ratings agencies globally" while noting that "this scrutiny will not preclude our ability creatively and still within our means to pursue progressive policies to achieve our development objectives". The ratings agencies have been criticised as lacking credibility by among others Mzwanele Manyi, a vocal critic of dismissed finance minister Pravin Gordhan and an analyst on the Gupta-owned news channel ANN7, as well as the African National Congress' women's and youth leagues.

Lack of financial experience

Gigaba and his deputy, Sifiso Buthelezi, have many years experience at a senior level between them but no experience with the national accounts and have never been part of the broader finance family which includes the South African Revenue Service (Sars), the Public Investment Corporation (PIC) and the Financial Intelligence Centre (FIC).

All ministers of finance since 1994 -- except for Des van Rooyen, appointed by Zuma in December 2015 -- were part of finance institutions prior to their appointment.

A senior official explained to HuffPost SA that Treasury is strictly guided by the Public Finance Management Act and the Constitution and that as far as bureaucratic spending functions are concerned there aren't any grey areas.

"You either can do something or you can't. It gets murkier when policy decisions around fiscal priorities are considered, when we have to decide how to rein in spending. There is no recipe.

"With new phrases such as 'radical economic development' set to become part of policy, it will be a little more difficult to decide where to make cuts, for example," the official said.

Another source said officials won't blindly carry out the new minister's instructions and that officials strictly adhere to protocol and regulations. "If they are forced to do so he [Gigaba] will clash with experienced civil servants."

Both sources said politics inevitably comes into play when fiscal policy is determined by political leaders and that it is they who decide where the best place is to spend taxpayers' money in order to maximise social return. "Do we need to invest in Eskom infrastructure and for what reason? Or do we divert funds to buy new trains? Where will we get the most return?" one source said, explaining the choices faced by Gigaba.

The tabling of the mini-budget in October will give markets the clearest indication of changes under Gigaba's watch.

'Markets like predictability'

There are however fears that South Africa will find it increasingly difficult to deliver on its promises to its lenders and investors, one official said. "Our modelling and projections have been very accurate in recent times, but with increased political volatility and regular changes [in leadership at Treasury] our forecasts have been under pressure."

Institutions like the International Monetary Fund, World Bank and the ratings agencies rely on Treasury forecasts when they formulate their own analyses of the country's prospects.

"Markets like predictability and if we don't deliver on what we say we will, it's put down to incompetence, mismanagement or pulling the wool over their eyes. The greater the variance between what you said you would do and what is actually done, the greater the risk to your credibility," the source said.

Cautious welcome

Fears around the future of Lungisa Fuzile, the director-general, remain.

Fuzile was cautiously welcoming of Gigaba at the briefing, committing to building a relationship with him.

City Press reported on Sunday that senior Treasury officials who report to director-general Lungisa Fuzile expected him to quit after President Jacob Zuma axed finance minister Pravin Gordhan and his deputy, Mcebisi Jonas.

Both sources Huffpost SA spoke to said he was a crucial stabilising factor in the institution. "If he goes, others might follow," a source said, who added the pattern at other alleged "captured" institutions like Sars was to bring in new senior staff and eject veterans.

Fuzile told a press conference before the tabling of the budget speech the turnover of ministers at Treasury creates uncertainty among staff and undermines morale. "Every time there is an event [like the dismissal of a minister] good people leave the department," he said.