Finance Minister Malusi Gigaba’s Action Plan Is A Damp Squib

I scoured through the Treasury's press release to find some sparks of hope. I found none.

18/07/2017 03:59 SAST | Updated 18/07/2017 03:59 SAST
Gianluigi Guercia/ AFP Photo / Getty Images
South African newly appointed Finance Minister Malusi Gigaba briefs the Press at the South African government Communication's office on April 1, 2017, in Pretoria, South Africa.

Margaret Thatcher reminded us during her days that, "yes, the medicine is harsh, but the patient requires it in order to live. Should we withhold the medicine? No." The sick man of Africa that is our economy urgently requires this bitter medicine at present and the jury is out on whether our leadership possesses the strength of mind and focus on administering it. Like many South Africans, I scoured through the Treasury's press release to find some sparks of hope for rebooting our economy out of a recession, rising unemployment and spiralling public debt, but I emerged quizzical and disillusioned at any prospect of setting our economy on a growth path.

In order to get the confidence of investors, businesses and consumers the Finance Minister had to meaningfully address three things: policy certainty, spiralling public debt and unemployment. He has addressed nine issues, left many with questions and disillusioned even more. I can imagine the rating agencies, ever anxious about our rising public debt and public wage bill, speculating on what is meant by "sustainable wage agreement" for which Faith Muthambi is responsible for accomplishing by February 2018, a year before the general elections. Must we believe that the ANC could upset trade unions by not giving them above-inflation wage increases less than a year before a general election?

I can also imagine moneylenders, which we need to lend to small businesses to stimulate economic activity, panicking about "targeted debt relief for most vulnerable", a euphemism for losing your money by government decree for lending it to a small guy without security for the loan. The SOE reforms are a small comfort. In the medium to long term, we should dispose of all state-owned enterprises that forever burn limited public money like an SAA jet does to fuel. There is no valid reason why it is impossible to infuse an element of public service in the selfish profit-making activities of private businesses through tax credits or direct subsidies to incentivise them to service unprofitable markets in the public interest – a government responsibility.

Imagine how many tax paying businesses we could create by cutting up the SABC, SAA, Eskom and sell them to South Africans to run businesses, compete with each other, innovate, pay taxes and not come to the government for bailouts. An economy like ours in which businesses must compete with heavily subsidised, inefficient state monopolies is inherently anti-business and blunts the government's investment message. The private sector participation proposal in SOEs is a tacit acknowledgement of failure on the part of these monopolies. They do not only rob the public through bailouts and exorbitant prices but they also destroy industries.

Think of Nationwide which has been put in liquidation due to unfair competition from SAA. Think of Comair which hangs by the skin of its teeth from SAA's taxpayer-funded competition. Think of those independent power producers which are effectively blocked from meaningfully entering the market by a corrupt taxpayer-funded monopoly known as Eskom. How can you not be anti-business when you destroy private enterprises with taxpayer-funded monopolies?

Minister Gigaba just emerged from a policy conference in which businesses were cast in antagonistic terms yet expected to have the confidence to plough their capital in an economy where they might suddenly wake up to the news of a more burdensome transformation charter ingeniously cleaved with a Gupta spanner known as Mosebenzi Zwane. Those hundreds of semi-literate delegates converged on that expensive venue in Midrand in order to debate a contrived absurdity styled as "white monopoly capital" when the country faces far more serious challenges.

If Gigaba wants to set this economy on a growth path, he needs to administer the bitter medicine that might make him unpopular.

Investor confidence is not abstract. Before I open up a factory in a village, I need to be sure that the community does not look at me with antagonistic eyes in an ideological frenzy in which they blame businesses for community problems. This is the policy certainty that is missing from this government and Gigaba has had to distance himself and the Treasury from some things said and done by his colleagues.

Managing an economy is no different from running a household. When a family is in financial difficulties with their teenage son attending a university that year, they will likely sell one of the family cars and cut down on a lot of items of expenditure they have become used to. This is prudence. Why should it be any different when it comes to a government? While South Africans languish in poverty and unemployment with the economy shrinking just as our national revenues, the Zuma cabinet does not appreciate the moral paradox of a cabinet of close to hundred ministers and deputies costing over a billion a year.

Why has it not occurred to Minister Gigaba that this is a time when the government must itself be exemplary by doing more with little? Why does the president need all those empty suits and deadwood in the cabinet with their perks and privileges when ordinary South Africans struggle with basic necessities every day? With the news from former president Mbeki that Zuma's government has even ransacked a strategic reserve for emergencies which the former president maintained, it seems that the Zuma administration views an economy as a target to be raided by the victors after an election.

If Gigaba wants to set this economy on a growth path, he needs to administer the bitter medicine that might make him unpopular. He must slash public debt by cutting waste rather borrow new money to meet spending needs; he must starve all these failing monopolies of taxpayer rands and ultimately sell them to South Africans to run businesses. His government must abandon its ideological frenzy of antagonism towards businesses in which they are blamed for our economic woes. And his government must make it easier for unemployed South Africans to get low wages rather than no wages altogether. Trade Unions will hate him today but thank him for years to come for saving us from becoming a financial colony of the IMF.