Business

Question marks over the JZ shuffle

Lynley Donnelly, Lisa Steyn, Thalia Holmes

President Jacob Zuma's appointments have drawn both howls of protest and cautious optimism amid a decline in GDP.

Minister of Finance Nhlanhla Nene must take up where Pravin Gordhan left off. (David Harrison, M&G)

Just as president Jacob Zuma announced his newly panel-beaten executive – including a vastly overhauled economics cluster – the country’s economy lurched towards another recession.

Our shrinking gross domestic product figures, which declined by 0.6%, are indicative of the enormous task this administration faces. Prolonged platinum strikes weigh on the economy, as do power shortages, and globally South Africa must face the risks of spill-over effects from unprecedented changes in international monetary policy.

Along with a Cabinet criticised for being weighted more towards politics than management – and the wholesale removal of competent individuals – a number of new ministries has been created, including small business development, an overarching communications ministry, and the telecoms and postal services ministry, to mixed reactions.

Others, namely the national planning commission and performance, monitoring and evaluation department, have been quietly folded into a single unit and will remain in the presidency. The new Cabinet now weighs in at 35 ministers, 37 if you include the president and his deputy, and a further 37 deputies. It is more populous than that of countries with vastly larger economies such as the US and Germany.

It was hugely problematic to have more than 35 people reporting to one person, said Alan Hirsch, the director of the graduate school of development policy and practice at the University of Cape Town. Concerns regarding the cost of the new posts were secondary to the question of how many people one chief executive could have reporting to them, he argued.

“A better Cabinet structure would have been to have a much smaller number of senior ministers and have deputy ministers or junior ministers running subdepartments,” he said.

Many countries use this kind of Cabinet structure, including China, New Zealand and Canada.

The economics cluster has seen some of the most dramatic changes, starting with a new finance minister. But other key positions also have new faces, which have garnered receptions ranging from cautious welcome to downright shock.

Treasury
The replacement of Pravin Gordhan with his deputy Nhlanhla Nene has taken some digesting. Not because Nene is deemed lacking, but because any clear need to move Gordhan to the post of co-operative governance and traditional affairs was simply absent. Gordhan steered the country through a global recession, while keeping a firm hold on budgetary metrics. Those most critical of the decision have questioned whether he did not pay the price for his tough stance on government spending, which got in the way of others’ expansionary plans. His seniority within the ANC gave him clout.

The only real criticism of Nene is that he lacks Gordhan’s political weight, potentially undermining the treasury’s ability to keep a tight rein on the government’s purse strings.

“Minister Gordhan had the strength to exert moral suasion on broader government in terms of fiscal discipline,” said the chief executive of the South African Chamber of Commerce and industry, Neren Rau. To achieve this beyond his own department, and even extend it as far as the presidency, would be Nene’s real test, said Rau.

When it comes to expertise, however, Nene’s is unquestioned. A long-time deputy, his knowledge of government finances is extensive, and he brings stability and policy continuity to a pivotal department.

Public Enterprises
Another surprise move was the elevation of former Western Cape premier Lynne Brown to the ministry of public enterprises, replacing the flamboyant Malusi Gigaba, who was moved to home affairs.

Gigaba was an activist shareholder minister, determined to see state-owned entities placed at the heart of economic development. Though deemed capable, during his tenure a number of key state-owned enterprises (SOEs) continued to experience major upheaval.

South African Airways is still struggling to secure leadership and financial stability after a mass exodus of its board and executives in 2012. Eskom is battling to complete crucial new power stations on schedule, as the strained electricity system faces the additional demands of winter. It is also without a permanent chief executive. It is temporarily led by board member Colin Matjila, who faces questions about activities in his former role as head of Cosatu investment arm Kopano Ke Matla.

Brown is undaunted by these challenges. She told the Mail & Guardian that she aims to make good governance a priority at these institutions.

“It is only in governing our state-owned enterprises in a stable, corruption-free manner that you are able to attract investment into the country,” she said.

“We have an opportunity to engage with the private sector in getting right what we might have had challenges with in the past,” she noted.

Brown plans to have extensive discussions with the various companies and role players in the department to familiarise herself with any “landmines” that awaited her. Eskom and SAA were likely to be her first focus areas, she said.

Brown has served as MEC for finance, economic development and tourism in the Western Cape. According to Alan Winde, her former counterpart in the Democratic Alliance, her long terms in government will stand her in good stead in the tough portfolio.

She is “not afraid to take tough choices”, he said, adding that Brown’s new portfolio would need “a really strong hand on the tiller”, given its importance to the economy.

Energy
The biggest question mark in the Cabinet shuffle hangs over the head of Tina Joemat-Pettersson as minister of energy.

It has sparked the strongest reaction, ranging from concern to absolute outrage – particularly in light of the possibility that a nuclear build, involving trillions of rands in tenders, may be on the horizon.

In light of Joemat-Pettersson’s unimpressive performance at the department of agriculture, forestry and fisheries, her appointment has the industry worried that the state is ignorant of the importance of the energy portfolio and the attention it requires. The portfolio is a challenging one, which has lacked consistent leadership for very many years.

Joemat-Pettersson enters at a time when South Africa’s energy balance hangs by a thread, and poor decisions will result in problems that will dog the country for 30 or 40 years to come and have a huge economic impact.

Increasing the existing energy-generation capacity is the first call of business, with massive amounts expected in tendering and spending on coal, nuclear and gas power.

This will require Joemat-Pettersson – considered by her critics to be a political lightweight – to negotiate at the highest level with heavyweights in governments and financial institutions.

As agriculture, fisheries and forestry minister, she was implicated in a damning report in which the public protector found irregularities in the awarding of an R800-million tender to Sekunjalo and found that Joemat-Pettersson had attempted to shut down the investigation, which amounted to illegal interference. Joemat-Pettersson has applied to the courts to have the report set aside.

More recently, the department’s fishing rights allocation process was scrapped following an audit that found it had not been handled correctly.

The DA has said her appointment to the portfolio is “yet another indication that President Jacob Zuma is far more concerned with creating jobs for his pals than he is about good governance” and said she “should be fired, not promoted”.

Mineral resources
New minister Ngoako Ramatlhodi has taken over the portfolio at a testing time for the mining sector, and it appears he realises this all too well: “It looks to me like we might have to do a lot of hard work.”

Asked about his biggest challenge – the four-month-long wage strike in the platinum belt, led by the Association of Mineworkers and Construction Union – Ramatlhodi said the union could rest assured that they are “a real stakeholder” and will be treated fairly and with respect by the ministry, something which had not been achieved under Susan Shabangu’s reign.

The mining sector is the engine of the economy. Statistics SA this week showed gross domestic product growth has declined, dragged down by mining output that contracted 24.3% in the first quarter of 2014.


Tina Joemat-Pettersson and Ngoako Ramatlhodi have much to attend to. (Madelene Cronjé, M&G)

Hoping to be perceived as a man of action, Ramatlhodi engaged with stakeholders less than 24 hours after being sworn in.

On Wednesday his department announced the establishment of an intergovernmental technical team to work with labour and business to resolve the strike.

This has made a good impression on various stakeholders, who are pleased about an injection of neutrality as well as the new minister’s legal background.

The former deputy minister and director general remain in place, allowing for some continuity in the department.

Ramatlhodi’s decade-long stint as Limpopo premier, starting in 1994, saw him become the subject of a long corruption probe, looking into kickbacks he had allegedly received from a social grants contractor. The investigation was controversially shelved by the Scorpions in 2008.

In 2009 the M&G reported on Ramatlhodi’s hush-hush participation, while premier of Limpopo, in a property deal near a platinum mine that raised questions about his suitability for high office.

“A Mail & Guardian investigation appears to implicate him in abuse of office or corruption,” the paper wrote at the time. Ramatlhodi initiated legal proceedings against the M&G, but has not pursued it further to date.

Ramatlhodi re-emerged in 2010 as the deputy minister of correctional services and later as the spearhead of the ANC’s campaign to clip the wings of the Constitutional Court. In an opinion piece he wrote, which was published in the Times, Ramatlhodi said the internationally acclaimed Constitution was a compromise that “emptied the state” and disempowered the black majority, and that “forces against change reign supreme in the economy, judiciary, public opinion and civil society”.

The business community has expressed concern over Ramatlhodi’s inexperience in mineral resources and also how international investors might react to his appointment.

Telecommunications and postal services
The splitting of the former communications ministry in two has caused almost as much confusion as there is horror over the disposal of its minister, Yunus Carrim, who is said to have done more for the sector in his nine months at the helm than has been achieved by any other minister in the past decade.

Stepping in to preside over the newly formed ministry of telecommunications and postal services is Siyabonga Cwele who, thanks to splashy headlines, is perhaps better known for his drug-trafficking former wife, Sheryl Cwele, than his role as state security minister and former minister of intelligence. He is known as one of the men behind the contentious Protection of State Information Bill, aka the secrecy Bill.

A major cause for concern is that the new telecommunications and postal services ministry will not include the Independent Communications Authority, which plays a key role in the telecommunications sector.

Instead, the regulator will be housed in the new communications ministry, which appears to have been set up to deal largely with government public relations and information. The split has also left stakeholders unsure of where ministry bodies set up under Carrim (such as the Broadband Advisory Council and the Cyber Security Advisory Council) will report to.

Cwele hasn’t dazzled onlookers with his performance in former roles and the telecommunications industry requires strong leadership at this crucial point in time.

Critical issues that will require his attention include finalising LTE (or 4G) and spectrum allocation policy, as well as progressing digital migration by settling a long-running argument about whether television set top boxes should be access controlled. The sector may face further delays as the new minister, with no expertise in the industry, gets to grips with the issues.

Economic development
Ebrahim Patel will stay put as minister at the department of economic development. 

Following the official swearing in ceremony Patel told the M&G he would continue with the work he has been doing over the past five years, namely looking at cost-effective infrastructure programmes and how to expand these further and develop skills.

The work experience coming out of the project is key, he said, as well as focusing on greener projects which could work to South Africa’s advantage.


Ebrahim Patel retained his post as minister of economic development. (David Harrison, M&G)

Economic development has been behind a drive for jobs, but has failed to drive down exceptionally high unemployment numbers in the past, while institutions such as the Industrial Development Corporation and the Competition Commission have performed reasonably well under Patel’s watch.

Patel’s New Growth Path continues to take a backseat to Trevor Manuel’s more business-friendly National Development Plan, which remains the blueprint for what President Zuma has termed rapid economic transformation.

Trade and industry
Another of the few ministers to keep their job was Rob Davies. The continuity at the trade and industry department has been welcomed, as has his discipline and devotion to work. But the emphasis Davies places on industrial planning and policy over trade promotion has been a weakness, argued Wilmot James, spokesperson on trade and industry for the DA, particularly at a time when South Africa’s exports have been performing so poorly, contributing to the country’s weak balance of payments.

But Davies responded that a number of industrial policy interventions have had a positive impact on manufacturing, and in the context of continued effects of the financial crisis, “we are much better off than we would have been” had these not been in place. He said trade and industry has also done extensive work in opening up developing markets, particularly in Africa, to local exporters of value added products.

Davies wants to see value added activity and industrialisation become the drivers of economic transformation, growth and employment creation.

Efforts to achieve this would include ways to increase localisation, identifying dynamic companies with the potential to perform when it came to exporting value added products, as well as potentially tailoring manufacturing support programmes to provide greater returns on job creation and local industrial development.

Last but not least
A number of other important departments in the cluster have also seen change – not least of which are the ministries of agriculture, forestry and fisheries, and rural development and land reform. Agriculture now has former National Union of Mineworkers president Senzeni Zokwana as its minister and erstwhile police commissioner Bheki Cele as deputy.

Cele was axed over the findings of a report into questionable leasing of police buildings, which he is reportedly in the process of challenging.

In a newsletter this week the Agricultural Business Chamber (Agbiz) welcomed the new appointees but said they were “nevertheless a surprise for Agbiz, as we were not aware of either of them having agricultural experience”.

The return of Gugile Nkwinti to rural development and land reform was welcomed, as it ensured continuity in a department dealing with very complex issues, said chamber chief executive John Purchase. To introduce a new minister would have made an already difficult process even more so, said Purchase. Nkwinti gets two deputy ministers, including Mcebisi Skwatsha, a former ANC chair in the Western Cape.

Finally, water has been merged with sanitation, to form a stand-alone department. Nomvula Mokonyane, former premier of Gauteng, and dogged Zuma supporter in a province thick with anti-Zuma sentiment, heads the new ministry.

The reason for merging water and sanitation was not clear, said Carin Bosman, an independent water governance consultant.

Sanitation was a crosscutting issue and there were questions over whether it belonged under the auspices of local government or human settlements, and whether the department’s focus should be management of a natural resource or the delivery of services.

It also potentially created a constitutional conundrum, because the Constitution was clear about the division of responsibilities between national, provincial and local government, she said.

It stated that provision of sanitation was a local government responsibility, whereas the management of water resources belonged at the national level.


Zulu must bring in some bark

Lindiwe Zulu, the newly appointed minister of small business development, was branded Zuma’s “terrier” last year by the Zimbabwean government. And that’s exactly what the former international relations adviser to the president will need to be: somebody whose bark gets her noticed – even if her ministry’s bite doesn’t quite match up.

The introduction of a new ministry to oversee the affairs of small business in South Africa has been met with extreme criticism by many, but welcomed by others.

Detractors include industry bodies and pundits who warn that the new ministry could increase red tape for companies already groaning under bureaucracy, and lack the political weight of other more established departments.

“Support for small and medium business enterprises would have been better served by streamlining existing government departments,” said the Democratic Alliance’s finance spokesperson, David Ross.

Zulu is tasked with bringing gravitas to the new department, lobbying to receive an appropriate piece of the fiscal pie, and to prevent it from being lost in the shadows of the department of trade and industry (DTI). She will also need to establish an ideological framework for the ministry that is simultaneously distinct from, and harmonious with, that created by communist-aligned head of the DTI Rob Davies. – Thalia Holmes


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