POLITICS
22/02/2018 04:43 SAST | Updated 22/02/2018 04:51 SAST

Ramaphosa Takes Charge Of The Economy

The new president instructed Finance Minister Malusi Gigaba how he should amend his budget speech.

President Cyril Ramaphosa and Finance Minister Malusi Gigaba at the WEF in Davos.
Moeletsi Mabe/Sunday Times/Gallo Images/Getty Images
President Cyril Ramaphosa and Finance Minister Malusi Gigaba at the WEF in Davos.

President Cyril Ramaphosa has taken charge of the country's finances and had a strong hand in Finance Minister Malusi Gigaba's budget speech.

Officials with direct knowledge of budget preparations say the president was deeply involved in ensuring the correct messaging is contained in Gigaba's speech, which carries the same themes of renewal and integrity as in Ramaphosa's state of the nation address.

READ: The Budget: What You Need To Know

According to HuffPost's information, Ramaphosa and Gigaba spoke numerous times about the contents of the speech, including what should be included and what should be left out. Ramaphosa reviewed drafts of the speech and instructed the minister of finance what should be amended.

The new president has quickly taken command and control of the economy: Gigaba announced that "The president will establish a commission of inquiry into the functioning and governance of the South African Revenue Service (Sars)." And Ramaphosa has also taken control of fixing state-owned companies. He will head a state-owned companies council to reform parastatals. This means that the president will effectively take over the work of the Public Enterprises Minister Lynne Brown.

RODGER BOSCH/AFP/Getty Images
Finance Minister Malusi Gigaba delivers the 2018 Budget speech in the National Assembly at the South African Parliament, on February 21, 2018, in Cape Town.

Another official said Ramaphosa gave National Treasury political cover with his state of the nation address last week. According to this official, the president's speech contained a number of proposals which were previously discussed at Treasury, but never implemented by government. This official added there is "great optimism" among officials there that Ramaphosa's election will stabilise the country's finances and ease the pressure on the department.

A third official also confirmed that Ramaphosa had kept himself involved with the budgeting process "even before he became president."

Ramaphosa, the Cabinet and the Treasury team worked since the medium-term budget policy statement was passed last year to ensure that steep spending cuts were secured.

Ramaphosa and Gigaba spoke numerous times about the contents of the speech, including what should be included and what should be left out.

This was a make-or-break budget for South Africa which stands on the edge of a fiscal cliff as well as a downgrade to full junk status that would precipitate a massive outflow of funds if investment grade rating is lost.

Ramaphosa was elected ANC president in December and has since been consistent in his message that the country needs renewal and that a course correction is urgent. This was carried through his state of the nation address and was also a theme of Gigaba's budget. He quoted Ramaphosa and said "a new dawn" is upon South Africans.

Gigaba's speech also reflected many of the themes Ramaphosa identified in his two addresses to Parliament last week and on Tuesday. The finance minister, who was appointed in March last year after Pravin Gordhan was dismissed by then-president Jacob Zuma, also referred to ethical leadership and the change of national sentiment in the country.

He told MPs South Africa now had the opportunity to achieve faster growth and that this opportunity had been made possible by the country's improving economic prospects.

Treasury has also given a brutally honest appraisal of the precarious state of the country's finances in a hefty 218-page Budget Review. The document is also themed around renewal and restoration, like all of Ramaphosa's major speeches since he became ANC leader on 20 December 2017.

Gigaba's speech also reflected many of the themes Ramaphosa identified in his two addresses to Parliament last week and on Tuesday.

Although tough, the Budget was well received by commentators and markets, which applauded it for taking tough decisions (like raising the VAT rate) and for being business-friendly.

Trade unions and a civil society coalition, as well as the opposition parties, oppose the hike in the VAT rate and the steep rise in the fuel levy for punishing the poor.

The Budget is as pro-business as a South African budget can be. Personal and company taxes were largely maintained as was after a period of steep hikes in capital gains and shareholder dividend tax rates and the establishment of a new rate of 45 percent for the top tax bracket.