13/11/2017 14:03 SAST | Updated 13/11/2017 14:04 SAST

Analysis: Why Michael Sachs’ Resignation From Treasury Is A Bombshell

The president's student fee proposal means that R50-billion of cuts from other budgets will have to be found -- an almost impossible task .

Esa Alexander/The Times/Gallo Images/Getty Images
Finance Minister Malusi Gigaba is flanked on his right by Treasury director-general Dondo Mogajane, and on his left by his deputy Sfiso Buthelezi and SARS commissioner Tom Moyane before Gigaba's medium-term budget speech in Parliament on October 25, 2017 in Cape Town, South Africa.

Michael Sachs has confirmed to HuffPost SA that he has resigned as head of the National Treasury's Budget office. He is working out the details of when he will leave with director-general Dondo Mogajane, who is in China on a roadshow with Finance Minister Malusi Gigaba.

Sachs' resignation has sent shock waves through the markets because he quit after an incursion into the Treasury's powers by the Presidency to fund a populist free-fee model for higher education.

The resignation is also likely to have political ramifications since Sachs is an ANC blue blood who worked in the party's secretary-general's office for 10 years before being recruited by former finance minister Trevor Manuel to join the Treasury.

Officials in Treasury are said to be shocked and skittish about Zuma's fees tactics, but HuffPost SA could find no reports of further resignations.

The final straw
Backed by the head of state, a Presidency team is recasting the national budget's outline, decided on and tabled at Parliament in October, to fund a scheme hatched by Morris Masutha, a 28-year-old student activist and PhD candidate who thinks he has the answers to South Africa's pressing student funding crisis.

For Sachs, the Masutha episode was the straw that broke the camel's back. Treasury has been under severe political pressure for two years now as Zuma has twice reshuffled finance ministers to exert greater control over the national fiscus and greater political control over its officials.

Sachs has headed the Budget office since the previous incumbent, Kuben Naidoo, left to first join the National Planning Commission and later to become a deputy governor of the South African Reserve Bank.

It is a complex office consisting of many officials who work closely with national departments to ensure that policy mandates are effectively funded within the fiscal ceiling set by the Treasury.

The Budget office will also have final responsibility on how to make fiscal cuts deft enough to fund the R50.8-billion revenue shortfall revealed in last month's budget policy statement and to do so without harming the poorest South Africans.

Finding further budgets cuts
The president's fee proposal means that a further R50-billion of cuts from other budgets will have to be found -- an almost impossible task with rating agencies breathing down the neck of SA Inc. Two rating agencies will decide on the level of South Africa's investment grade rating on November 24.

It is understood that Gigaba was as upset as Sachs by Zuma's pressure on Treasury to find the money so he could announce the Masutha plan with which he has become enamoured.

Sachs is said to want to stay in government and is likely to seek a transfer to another branch of the state. The veteran civil servant has two Master's degrees: one from the London School of Economics and a second from Harvard's Kennedy School of Government. "His growth through the Treasury has been phenomenal," said Manuel on Monday.

Sachs attended secondary school at the ANC's Solomon Mahlangu college in Tanzania -- the institute where young people were trained to run what was then still a dream of a future democratic South Africa.

His work at the ANC headquarters included commissioning detailed economics studies and coordinating the work of the party's economic transformation committee. Sachs is the son of two ANC luminaries: Albie Sachs, his adopted dad, and Joe Slovo, his biological father.