/ 31 May 2019

Merged ministries a mixed bag

Merged ministries a mixed bag
Welcome back: President Cyril Ramaphosa (left) appointed Tito Mboweni as finance minister in October and returned him to the same position on Wednesday night. (Esa Alexander/Sowetan/Gallo Images)

Tito Mboweni’s return to the finance ministry and the retention of Pravin Gordhan as public enterprises minister, despite what is seen in some quarters as a politically motivated attack on him by the public protector, has pleased business analysts for the continuity this brings to these portfolios.

These two appointments were particularly important, given the need to provide stability in ongoing talks around the reform of power utility Eskom and bailout discussions for the parastatal, Intellidex’s head of capital markets research Peter Attard Montalto said in a note.

But analysts were less pleased with other aspects of President Cyril Ramaphosa’s new, leaner Cabinet, in particular in the water and energy sectors.

The decision to merge portfolios in the economics cluster, such as the departments of mineral resources and energy, received a mixed response.

Although the mining industry has welcomed the return of Gwede Mantashe to the mineral resources portfolio, the decision to merge it with energy has sparked unease.

This is “a problematic move”, said Attard Montalto, because it will create conflicts of interest as well as stretch the minister “given the complexity of both areas and the issues of Eskom and energy market reform”.

The energy department had oversight of key policy instruments such as the country’s integrated resource plan, which maps out the future energy landscape — crucially the extent to which South Africa begins reducing reliance on carbon-intensive coal-fired electricity. Even though it falls under the public enterprises ministry, Eskom’s business model is at the mercy of a profound change in the energy landscape as customers move towards cheaper renewable energy technologies — something energy policy makers cannot afford to ignore.

Mantashe’s appointment is problematic, argued Attard Montalto, because he is seen to be pro-coal and also pro-Eskom as a developmental state entity. “It will also take a considerable amount of time to get him up to speed on energy and many live issues on that front.”

The water and sanitation sector is facing a similar crisis to that seen in electricity. After years of dysfunction under former minister Nomvula Mokonyane, it has now been merged with the human settlements department, which deeply worries environmentalists. Before Ramaphosa’s Cabinet announcement the Centre for Environmental Rights (CER) wrote to him warning against merging water and sanitation with another department.

“It is only a matter of time before what are currently localised crises of infrastructure decay, towns without water, and the complete failure of the regulation of water use, reach national proportions,” the CER said. Expecting one minister to lead this large department, with its huge national responsibility and eroded internal capacity, as well as another department “is a high risk venture” and could result in “a water apocalypse”, the CER warned.

The merging of the trade and industry and economic development portfolios was also anticipated, but the appointment of former economic development minister Ebrahim Patel has been met with scepticism. Although a hardworking minister, he is seen as a micromanager and has been unable to hold onto a permanent director general since the 2014-2015 financial year.

In addition, Patel, with his roots in the labour movement and his emphasis on stiffer economic regulation, is not seen as pro-growth.

Citibank economist Gina Schoeman questioned what Patel had achieved in his role at the economic development department. She added that it was significant that Ramaphosa had “gone to some trouble” to appoint Patel by exercising one of his two options to appoint non-MPs to the Cabinet.

Patel will “within months” have to reveal what his department is planning, given its links to the president’s objective of inclusive economic growth, said Schoeman.

She said there are some positives in the mergers and changes of emphasis to departments, citing the labour department, which has been repurposed as the ministry of employment and labour. This could encourage officials to focus not on only on labour regulation enforcement and wage negotiations, but to emphasise the importance of job creation, Schoeman said. Similarly, the amalgamation of agriculture, land reform and rural development made sense because merging related portfolios should improve co-ordination.

Promoting “greater coherence, better co-ordination and improved efficiency” was indeed at the heart of the restructuring, the president told the country on Wednesday night. The number of Cabinet ministers has been reduced from 36 to 28.

But when accounting for several additional deputy ministers the wider executive, incorporating ministers and their deputies, is 68.