Victory celebrations in the tripartite alliance and among left-wing ministers over this week's Cabinet reorganisation are set to be cut short.
Victory celebrations in the tripartite alliance and among left-wing ministers over this week’s Cabinet reorganisation are set to be cut short as Finance Minister Pravin Gordhan sets out his spending priorities for the first time.
The medium-term budget policy statement, or mini-budget, scheduled to be announced in Parliament on Tuesday, will make it clear that the buck stops with Gordhan, rather than with Economic Development Minister Ebrahim Patel, say people in the know.
Patel took advantage of this week’s reconfiguration of the Cabinet cluster system, and the apparent backing of President Jacob Zuma, to assert his control of ‘micro- and macroeconomic development planning”—despite the fact that macroeconomic policy is a function delegated to the finance minister by law.
This, and the resignation of government policy chief Joel Netshitenzhe, was widely interpreted as evidence that leftist ministers were gaining the upper hand in Cabinet. But people briefed on the budget said it showed no evidence of a leftward shift.
Insiders say Gordhan will explain the difficult financial situation South Africa faces and insist that wasteful expenditure can no longer be tolerated. Gordhan has already announced a sharp fall in projected tax revenue.
Speaking at a United Nations conference on Thursday, Gordhan said growth for 2009 was expected to be near -2%.
The mini-budget speech will see tough austerity measures and a commitment to continuity, putting paid to big policy changes expected by Patel and his supporters, Cosatu and the South African Communist Party, say people who have seen the documents.
Netshitenzhe echoed this in an interview with the Mail & Guardian, saying that ‘the draft medium-term strategic framework that we developed was ultimately adopted by the new administration with minor changes”.
But the responsibility of making policy and deciding on spending priorities will remain with the treasury.
Insiders also insist that in his address to mayors in Cape Town this week Zuma said nothing that he had not said in his June budget vote speech. ‘The economic development portfolio will have a strong domestic focus and will address, among other things, matters of macro- and micro-economic development planning.” Zuma said: ‘We say this very much aware that in terms of legislation the national treasury coordinates macroeconomic policy. The affected ministries are working together to align work and detailed responsibilities.”
The crucial distinction is between broad-brush economic development planning and the detail of fiscal and monetary policy.
The treasury will remain the institution where economic policy is made and plans are priced, but will have to seek input from Patel’s department. This relationship has now run into trouble, with Gordhan said to be furious at Patel’s eagerness to claim he is in charge of overall economic decisions.
Sources said Gordhan is deciding how to manage the fallout, because the uncertainty is affecting the markets. Those around him say he wants to make it clear that the treasury holds South Africa’s purse strings without alienating Patel or Trade and Industry Minister Rob Davies.
Historically, the treasury has had a troublesome relationship with the trade department, clashing repeatedly over industrial policy and tariffs. But Gordhan is adamant that he wants the economic ministries to get along.
Patel’s supporters, however, suggest Zuma may invoke Section 97 of the Constitution that gives him the power to ‘transfer to a member of the Cabinet the administration of any legislation entrusted to another member”.
They claim this can override the Public Finance Management Act, which states that the ‘national treasury must promote the national government’s fiscal policy framework and the coordination of macroeconomic policy and coordinate intergovernmental financial and fiscal relations and financial policy”.
There is no clarity on whether he is planning this. This week’s shift of National Planning Minister Trevor Manuel to the economic infrastructure cluster is also characterised by his left-wing critics as a way of reducing his power. But Manuel’s ministry has never formed part of the economic cluster.
Clusters are also meant to firm up proposals before they are presented to the Cabinet. Insiders say treasury buy-in is essential because without money no plan can come to fruition.
Presidential spokesperson Vincent Magwenya said the government would give full details of the mandates of ministries in the weeks ahead.
Government officials also dismissed speculation about Manuel’s future following Netshitenzhe’s resignation.
Said one: ‘I think he [Manuel] will stay until he finishes the process. If Zuma and other senior government officials protect him from Cosatu’s attacks, I don’t see why he should leave.” Others around Manuel echo this, but make it clear he is intensely irritated by the lobbying of Patel and Higher Education Minister Blade Nzimande.