POLITICS
13/11/2017 17:04 SAST | Updated 13/11/2017 18:58 SAST

Jacob Zuma’s Shadow Budget Office: This Is How It Works

“It’s a direct attack on everything the Treasury represents."

President Jacob Zuma and his minister of finance Malusi Gigaba.
Foto24 via Getty Images
President Jacob Zuma and his minister of finance Malusi Gigaba.

Out of nowhere, President Jacob Zuma has conjured a Presidential Fiscal Committee (PFC) which took the lead role in trying to reshape the national budget to accommodate a free fees project brought to the president by his daughter's 28-year-old ex-boyfriend.

The Presidential Fiscal Committee first made its debut into political language when Finance Minister Malusi Gigaba referred to it in his budget policy statement in October.

In less than a month, it has been manoeuvred into pole position to displace the Treasury's role as the apex of budget making. The head of Treasury's budget office, deputy director-general Michael Sachs, resigned after the fees team tampered with the budget parameters set in last month's policy statement.

More staff could follow Sachs if the PFC continues to operate as it has done on its first outing, say Treasury staff. The president's other pet project which he seems intent on pushing through before his term runs out is a nuclear deal to procure a fleet of power stations.

In less than a month, it has been manoeuvred into pole position to displace the Treasury's role as the apex of budget making.

Nuclear has a popularly known price tag of R1.3-trillion, which may have increased because the rand has weakened. The procurement of nuclear would be transacted in US dollars.

The creation of the PFC means the president has taken control of budgeting away from Treasury and the committee of ministers and MECs which traditionally oversaw the budget.

In addition, Gigaba was not consulted on changes to the budget being crafted in the Presidency by the PFC to fund the R50-billion free fees plan first put on the agenda by student leader and PhD candidate Morris Masutha, a previous boyfriend of Zuma's daughter.

Over the last two decades, South Africa built a system of economic governance that was admired the world over; the independence of the National Treasury is enshrined in the Constitution. News of Sachs quitting and the encroachment of the Presidency in drawing up the budget spooked the rand on Monday when it spiked at 14.51 rands to the U.S. dollar.

More staff could follow Sachs if the PFC continues to operate as it has done on its first outing, say Treasury staff.

An official in the Treasury shrugged his shoulders when asked to explain what the PFC does and where it comes from. Senior staff had first heard about it when Gigaba referred to the president's fiscal committee in his speech to Parliament in October, he said.

"It's a direct attack on everything the Treasury represents," said a former ANC leader who helped draw up the framework of fiscal governance.

The Presidential Fiscal Committee is distinct from a separate process launched earlier this year, which made the Presidency's department of performance monitoring and evaluation responsible for determining the broad strokes of the national budget. To do this, the Presidency will issue an annual mandate paper to guide the National Treasury.

Sources in the Treasury say this mandate paper is ANC policy and is different to the President's fiscal committee.

"It's a direct attack on everything the Treasury represents."

Treasury spokesman Mayihlome Tshwete says the PFC is a known structure, which sets budget priorities and takes the tough decisions of where cuts will be made.

It consists of Zuma, Gigaba, Science and Technology Minister Naledi Pandor, Economic Development Minister Ebrahim Patel, Communications Minister Mmamoloko Kubayi and the Trade and Industry Minister Rob Davies.