Who holds the purse strings?

Despite the confident mini-budget, confusion persists over how South Africa’s economy will be managed, and by whom. Mandy Rossouw and Kevin Davie report

It was steady as she goes when Finance Minister Pravin Gordhan addressed Parliament this week, but in the engine room of economic policy, division and confusion persist.

Gordhan’s medium-term budget policy statement is the clearest view yet of the kind of economy the Zuma administration wants. It sets out expanded social spending in the next three years, which will be funded by dramatically increased borrowings, and a war on waste and corruption will ensure that taxpayers get more bang for their bucks. Continued infrastructure investment will support South Africa’s capacity for growth.

But Mail & Guardian inquiries ­suggest that the battle for control of the biggest economic decisions is far from over.

Some senior government officials said President Jacob Zuma wants Economic Development Minister Ebrahim Patel to take a more senior role — he has insisted, according to people who were present, that Patel is present at all times in Cabinet meetings. The suggestion is that Patel will be the policy architect while Gordhan’s role will largely be that of accounting officer.

It is unclear whether Gordhan would accept such an arrangement, which would effectively consign him to being deputy minister.

Legislative changes would also be required, as the Public Finance Management Act gives the finance minister responsibility for macroeconomic policy at present.

But some of those in Zuma’s inner circle said he is prepared to invoke the Constitution to change this, once he has sorted out how to manage any political fallout. Others close to the debate said he has given no indication of what his real preference is.

Section 97 of the Constitution gives South Africa’s president the power to ”transfer to a member of the Cabinet the administration of any legislation entrusted to another member”.

A government source familiar with discussions on the issue said Zuma is trying to manage the sensitive issue of transferring the ultimate power over economic policy from treasury to Patel’s newly established department. Other sources at Cabinet level took a different tack, arguing that the debate was not over who would be in charge — power was likely to be distributed — but how the government’s planning function, led by Trevor Manuel and Collins Chabane, would operate.

The talk, one such person said, is of Patel’s role in planning such key micro-economic areas as trade and industrial policy and mining regulation, as well as their interface with the macro-economy.

It is clear, however, that the discussion is far from settled and Cabinet sources say the debate with Cosatu, in particular, on these issues is unresolved. Cosatu has put pressure on Zuma to give Patel greater powers to intervene in economic policy to break decisively with what it views as the ”neo­liberal” policies of the past.

Zuma is understood to have asked Patel and Gordhan to present reports to him on how they see their respective roles and how they will complement each other. This week presidential spokesperson Vincent Magwenya said there is no time frame for when Zuma will pronounce on the issue.

Cosatu general secretary Zwelinzima Vavi told theM&G that the federation is waiting for Zuma to make a ”proclamation” that would likely change the law.

A senior government source said although treasury holds the government cheque book, it should not be left to decide unilaterally which cheques to sign. ”In some other countries treasury serves as the accounting department of government, so why should it also make policy?” the source said.

The treasury is seen to have ”done well” in steering the economy on to a growth path before the recession, but had done little to develop or support the informal economy. This responsibility could, therefore, be shifted to another ministry, with the result that Patel would oversee the informal sector, whereas Gordhan would continue to manage the economic mainstream.

This week Gordhan and his treasury team unveiled a confident budget under trying economic conditions. But behind the scenes treasury officials were still voicing concern about the lack of clarity over who is in charge. Several said they were angry and disappointed about the muddle.

Asked about his and Patel’s respective roles at a media conference this week, Gordhan said that a decision was awaited from Zuma on the issue.

Despite their own jitters, treasury officials said Gordhan is steadfast in the belief that they will be able to live with whatever Zuma decides.

The current policymaking confusion is reflected in the growing clamour from the ANC Youth League and its left-wing allies for nationalisation of key industries, which can only complicate the plans for extensive borrowing announced in Gordhan’s mini-budget this week.

No government official or senior ANC leader has supported the call of Julius Malema, the ANCYL leader, for nationalisation of the mines, but neither have they repudiated nationalisation as a policy option. This can only make investors and lenders uneasy about the government’s future willingness to repay loans. Government will increase its borrowing to 11.8% of GDP this year, about R600-billion in the next three years.

The M&G asked a range of government officials, including ministers, for comment on the issue. But the general response was that commenting would needlessly fuel the debate.

One official said if they speak on the issue, the youth league will begin to lobby ministers and ANC leaders for support and ”government has lots more important things to worry about”.

ANC spokesperson Jackson Mthembu said lobbying is unavoidable. ”The youth league can effect any discussion they deem necessary. They have serious influence on the mother body.”

Mthembu confirmed that nationalisation has not been tabled for discussion in the ANC’s national executive committee. Only if the issue finds expression at the 2012 ANC policy conference, which precedes the all-important national conference in December 2012, should it be taken seriously.

”That doesn’t mean such a view will not gather enough support [in the meantime].”

The youth league also has a seat on the ANC’s economic transformation subcommittee, which decides the direction of macroeconomic policy.

Asked about the potential influence of the youth league’s comments on South Africa’s international standing and ability to borrow, Mthembu said the government remains committed to a mixed economy in which the private sector continues to play an important role.

”In the main we have been married to a mixed economy of private sector and government. An investor will judge you on your track record and we have always been a mixed economy.”

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Mandy Rossouw
Guest Author
Kevin Davie

Kevin Davie is M&G's business editor. A journalist for more than 30 years, he has worked in senior positions at most major titles in the country. Davie is a Nieman Fellow (1995-1996) and cyberspace innovator, having co-founded SA's first online-only news portal, Woza, and the first online stockbroking operation. He is a lecturer at Wits Journalism. In his spare time he can be found riding a bicycle, usually somewhere remote.

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