26/10/2017 17:54 SAST | Updated 27/10/2017 06:22 SAST

Broken Economy, Smashed Confidence: It's State Capture, Gigaba!

Finance Minister Malusi Gigaba can talk about deficits and tax and debt all he wants. The real reason we’re up the creek is state capture.

Sumaya Hisham / Reuters
Finance Minister Malusi Gigaba speaks to members of the media after delivering his medium-term budget speech in Parliament, in Cape Town, South Africa, October 25 2017. REUTERS/Sumaya Hisham


During the ANC's policy conference in July, talk at press conferences was dominated by policy issues.

Official after official was trotted out to discuss the future of social grants and the widening of the social net, the ongoing battle to reduce inequality and debt, the status of crime prevention programmes and the SABC's digital migration. But state capture was nowhere on the agenda. Questions about grand corruption, the hollowing out of state-owned enterprises and President Jacob Zuma's impunity were swatted away by spokespeople and ANC luminaries alike.

It was the same with Finance Minister Malusi Gigaba's medium-term budget policy statement on Wednesday. His speech was appraised as if it were delivered under normal circumstances in an economy straining under the constraints of low growth and structural limitations. Debate and discussion have -- understandably -- focused on the yawning gap between revenue and expenditure, the enormous increase in government debt and the worsening GDP prospects. Gigaba even referred to "perceived" political instability.

Nowhere in the mini-budget or the Budget Review is there mention of the Guptas. The word "state capture" doesn't feature either. Nor does Sallim Essa or Trillian Capital Management. But they're everywhere. They lurk in the warnings by Treasury bureaucrats that state-owned enterprises represent a "clear and substantial" threat to fiscal stability. They feature in the background of the three scenarios officials have mapped out about the effects more credit downgrades will have. And they cast a shadow over the numerous statements explaining why crucial programmes will have to be cut.

Gigaba's appointment wasn't normal; it wasn't prompted by President Jacob Zuma's desire to improve governance or to realign fiscal policy to the National Development Plan or any other vaunted policy direction. If it was, where were the "radical" shifts or changes of direction that would surely have followed? Gigaba was appointed because Zuma and his fellow travellers were tired of having to battle the incumbent political leadership to get access to the keys of National Treasury.

At their policy conference ANC delegates and the leadership spoke about policy and step changes and new directions. But none of those debates were even remotely relevant, because the widespread corruption, decay and state capture which have wracked the party weren't tackled head on.

Similarly, Gigaba's attempts to talk state efficiencies, tighter procurement controls, mining policy, or outlook for agriculture ring hollow and dishonest. This state's biggest problem is unbridled corruption. This government's biggest problem is that it is led by a president who acts with absolute impunity. And that leads to the myriad economic problems we are now facing; problems that will need principled and skilled political leadership.

Fired Finance Minister Pravin Gordhan delivered two overtly political speeches when he tabled his last mini-budget in October last year and his final budget in February this year. His aim was to clearly warn of what will happen if state finances aren't managed responsibly and prudently. "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," he told MPs five weeks before Zuma knifed him.

Since then -- a mere eight months ago -- the state of public finances has worsened dramatically, our financial institutions have come under enormous political pressure, our investment-grade ratings have tumbled, and the office of the public procurement officer is seemingly being "restructured".

All of this has not happened under normal circumstances. It has happened under the leadership of a president who has enabled the establishment of a shadow state, on the watch of a governing party too afraid to rein in executive excess, and under the direction of a cabal of rent seekers raiding public resources.

Treasury officials identify political and policy uncertainty as one of the main impediments to economic recovery. And it appears that is set to continue.