09/05/2017 18:03 SAST | Updated 10/05/2017 08:41 SAST

Malusi Gigaba Tries His Hand At Radical Economic Transformation

The minister of finance trekked to parliament on Tuesday. This is how it went.


The latest leg of the Malusi Gigaba introduction tour saw him face members of parliament's standing committee on finance on Tuesday. The new minister of finance – in office for just more than five weeks – was clearly out to impress, with his trademark flashy smile and what looked like a quintuple Windsor knot, whilst engaging in a dignified, thoughtful manner.

1. Radical economic transformation

This must surely be the most misunderstood, misquoted and unclear phrase currently bandied about in South Africa's political economy. Responding to a question from Yunus Carrim, the chairperson from the African National Congress (ANC), Gigaba said he will try to define radical economic transformation within the framework set by President Jacob Zuma during his state of the nation address in February. The problem is: besides mentioning the phrase nine times during his speech, he didn't define it at all. Pravin Gordhan –- removed from office as finance minister by Zuma five weeks ago -- did venture do so in his budget speech. Gordhan's definition centred around responsible fiscal management and inclusive growth. We're still not sure what Gigaba's definition entails. But, he added, its an ongoing debate: "It must not be feared."

2. Economic orthodoxy

The minister will have to face up to economic realities eventually. Just because you say you're going to be "radical" doesn't mean it's possible or that radical things aren't already being done. He told members of parliament that radical plans can only be carried out once planned programmes are measured against the fiscus, against what's available. What's more, he agreed the economy can only grow if private enterprise is allowed to flourish, so that more taxes are paid and more jobs are created. And – sacrilege! – he added that he agrees with the sentiment that organised business needs more support. Realeconomics.

3. Reinventing the wheel

Gigaba spoke – quite correctly – about unsustainable high levels of poverty and inequality and that the creation of employment is the only way to lift millions of people out of squalor. He also expanded on how government should support emerging and small business, what the role of the private sector is and how big business understands what they have to do. He also referred to government's preferential procurement programme, designed to uplift emerging, black business. This is all good and well, but it's not new. It was in fact the mantra of the previous ministry, who championed the idea of Team South Africa and who helped get the CEO Initiative off the ground. It was also the previous ministry that tried to grow the economy precisely so that the poor could get a stake in commerce. Gigaba's lecture sounded stale and out of date. It's becoming clear just how big a setback the reshuffle was.

4. National Treasury: accessible to all?

When Nhlanhla Nene was fired by Zuma and it was justified with a bogus story about him being deployed to a non-existent job at the Brics Bank, his replacement Des van Rooyen said Treasury "needs to be open and accessible" to the people. It mustn't be seen as this all-knowing, aloof and holier-than-thou institution, was the message. Gigaba has continued where Van Rooyen and Zuma left off. He quoted himself, reading from a statement he made shortly after his appointment, where he reiterated Treasury is a department that is part of "the people's government" and that it "must be accessible". Gigaba – again quoting himself – said there is a perception that Treasury is controlled by "orthodox economists, big business, international investors and powerful interests". That must be proven wrong. The thing is: Treasury is the keeper of the public purse, it does have quite a different role to play than say, the department of sport and recreation. And as far as access goes: for whom must Treasury be accessible? Gordhan's court papers and Thuli Madonsela's "State of Capture" gave us the answer to that question.

5. Policy paralysis

David Maynier, the Democratic Alliance's shadow minister of finance, pressed Gigaba about the impact of policy uncertainty, saying private capital is not investing because there is uncertainty in the market. This leads to a stagnant economy and the creation of fewer jobs than necessary. He attributed a lot of this recent uncertainty to the firing of Gordhan and the subsequent public remarks of Professor Chris Malikane, an economist at the University of the Witwatersrand who also serves as an advisor to Gigaba. The minister however, besides saying Malikane has been "reined" in, refused to disown Malikane's philosophies, arguing that all viewpoints should be entertained and that he will remain as an advisor. This is not what international markets, investors and yes, ratings agencies, would want to hear. To paraphrase Gordhan: it takes a lot of hard work to build credibility and confidence, but it's easy to destroy it. Gigaba is going to have to pick a line and pick an ideology and stick to it. Floating about and entertaining the whole smorgasbord of economic theory is no way to run an economy.