Let’s see what Gigaba can do for the economy
NEW Finance Minister Malusi Gigaba faces and will continue to face tough negotiations with international investors and rating agencies. Apart from this, his appointment created a massive negative opinion among South Africans, that I must say, he appears to manage graciously.
The role of public opinion in the political economic system of a country cannot be ignored.
Take for instance the unexpected vote in favour of Brexit in the UK, as well as the unexpected vote for President Donald Trump in the US.
Public opinion will always evaluate the effect of economic and other policies of the ruling party in terms of its effects on the welfare of its voters.
Public opinion will also evaluate the effect of the economic system like the ability of the system to deliver economic growth, job creation and a more equitable income distribution.
Public opinion
If public opinion feels that either or one of these two institutions do not deliver on their needs and expectations, then public opinion will result in strikes, public unrest, public gatherings etc.
The firing of Pravin Gordhan as finance minister and the appointment of the flamboyant Gigaba once again illustrated the attention and power of public opinion.
The movement for the secret vote of no confidence in President Jacob Zuma shows only one of the current reactions of public opinion.
Gigaba stated on more than one occasion his commitment towards inclusive growth through radical economic transformation by boosting foreign direct investments leading towards job creation among the black youth and black industrialisation.
This is in line with the government’s “yes initiative” – a three-year programme – to create one million youth internships and especially the introduction of the government’s agriculture growth initiative, supporting emerging and commercial farmers with access to water, markets and funding.
Gigaba’s visit to the US and meeting with Moody’s Investors Service last week focused on the important message that “fiscal policy won’t change”.
Lesetja Kganyago, a former head of the National Treasury and the current governor of the Reserve Bank, last week shared his view that Gigaba is capable of doing his job.
His statement follows a series of intense meetings with the minister and his deputy to address the country’s economic challenges.
Kganyago said he has had “a long relationship with Gigaba”, and that South Africa needed a minister of finance that understands politics.
Kganyago said he trusted the depth of knowledge at the Treasury and was confident that, with the support of this capable team, Gigaba would captain South Africa through stormy conditions.
The rand reached its strongest level against the dollar late last week since the reshuffle of the cabinet; another proof that public opinion should not be under estimated.
The fundamentals important for investor confidence is in place. The World Bank expects an economic growth rate of less than 1 percent for South Africa this year. Kganyago, however, is confident that a grow rate of 1.2 percent is achievable.
Various economists I spoke to over the weekend, indicated that if Gigaba proved that he would continue to keep up the strategies embedded in the medium-term Budget framework; that the fiscal deficit did not exceed 50 percent of GDP; that the Budget deficit doesn’t increase more than 3.2 percent of GDP over the next two years; that inflation can be kept under control and that the government can transform public enterprises into profitable institutions, public opinion will change from its current negative outlook.
This could also result in change to a much more supportive and “understanding overall opinion”.
Give the man an opportunity to not, like his predecessor, talk the talk but to deliver on the promises of the government.