The focus after the ANC’s national executive committee (NEC) lekgotla, held over the weekend, was on party secretary general Ace Magashule’s deceptive comments about the Reserve Bank. But the real story is the adoption of far-reaching changes and a move towards decentralisation in procurement.
The ANC has taken a decision to decentralise procurement, review the Public Finance Management Act (PFMA) and the Municipal Finance Management Act (MFMA) as well as review and possibly amend regulations dealing with the relationship between the treasury and accounting officers.
The decision has raised eyebrows in some circles in the government and the party. Sources say, however, that it can be positive as the changes could assist the state to be more agile while at the same time tighten loopholes to prevent corruption.
According to the draft resolutions taken at the lekgotla and seen by the Mail & Guardian, the aim of the shake-up is to “improve the effectiveness of government procurement to achieve developmental objectives while ensuring accountability and transparency”.
The possible review and amendment of the PFMA, the MFMA and the Public Service Act is to ensure “that they enable and facilitate rather than impede developmental objectives and effective and efficient implementation of programmes while ensuring accountability, transparency and combating fraud and corruption”.
State procurement is a contested space. The hundreds of billions of rand spent by government to run the country are an attractive target for would-be looters. This has meant procurement has been at the centre of corruption and state capture allegations, in both the government and at state-owned companies.
The draft resolutions say that “procurement should be managed as a shared service on a decentralised basis”. This could weaken the treasury’s oversight of state buying.
The lekgotla agreed that the relationship between the treasury and accounting officers should be one of “mutual respect and understanding of respective roles”.
The aftermath, of what people who attended say was a “robust” lekgotla, was dominated by the backlash against Magashule, who pronounced that the NEC had resolved to review the mandate of the Reserve Bank and encourage quantitative easing to address intergovernmental debt.
But it has since emerged that no decisions were taken on these matters. Only one individual (from the South African Communist Party) raised quantitative easing and the subsequent discussion did not go far — and no resolution was adopted.
Finance Minister Tito Mboweni and ANC head of economic transformation Enoch Godongwana were left mopping up, after Magashule’s words sent jitters through the markets and hit the currency. Both senior leaders contradicted Magashule, with Mboweni hinting that such pronouncements amounted to sabotage.
“I don’t understand this obsession with the SARB [South African Reserve Bank] … why do we say things we know will destabilise the markets?” Mboweni, a former governor of the bank, said at a Reserve Bank event on Wednesday.
Magashule’s statement was made amid the announcement by Statistics South Africa that gross domestic product had contracted by 3.2% in the first quarter of 2019, the biggest drop in a decade.
It also comes at a time when there are set to be changes at the helm of the central bank, with governor Lesetja Kganyago’s renewable term ending later this year and a further two vacancies opening up.
Magashule’s pronouncements pit him against President Cyril Ramaphosa, who, according to two sources at the lekgotla, took a cautious approach towards the central bank in his closing address.
Although the mandate and ownership of the Reserve Bank are two separate matters, in his closing remarks Ramaphosa said the reality was that the state could not afford to buy out shareholders of the bank at present. (The ANC had resolved to nationalise the bank to ensure full state ownership at its Nasrec conference.)
“He [Ramaphosa] basically said that we have to be careful how we deal with our own resolution,” one NEC source said.
Magashule then announced that the ANC had decided to expand the mandate of the bank to include economic growth and unemployment.
Kganyago has repeatedly said that the mandate of the bank already includes this. After the first monetary policy committee meeting in January, he reiterated: “Our mandate is to protect the value of the currency in the interests of balanced and sustainable growth … anyone who says the bank must focus on growth has not read the Constitution, because we cannot have balanced and sustainable growth if you are running imbalances.
“Those imbalances include carrying unemployment,” he said.
The faction aligned to Magashule is said to have been using the control and the role of the Reserve Bank as a proxy battle against Ramaphosa. The Economic Freedom Fighters also waded in this week, criticising Mboweni and announcing that it will table a bill in Parliament to “realise the nationalisation of the SARB”.
Independent economist Thabi Leoka said Magashule’s announcement on quantitative easing pointed to a lack of understanding of the concept, given that it was misspelled and described as “quantity easing”.
She said the timing of the comments was also inappropriate, seeing that the GDP figures indicate an economy in crisis.
Leoka concluded that there was a “poor understanding” of economics at Luthuli House.