Nene’s bud­get booted

SA’s eco­nomic sit­u­a­tion has be­come so dire, min­is­ters need to re­vise eco­nomic plans pre­sented in Oc­to­ber as they are now out of date

CityPress - - Front Page - AN­DISIWE MAK­I­NANA, SE­TUMO STONE and HLENGIWE NHLA­BATHI news@city­

Govern­ment is set to take the dras­tic step of re­vis­ing ousted fi­nance min­is­ter Nh­lanhla Nene’s medium-term ex­pen­di­ture plans, as the eco­nomic sit­u­a­tion has be­come a lot more dire since he pre­sented it in Oc­to­ber. This un­prece­dented move was re­vealed by min­is­ters af­ter an ex­tra­or­di­nary min­is­ters’ meet­ing on the econ­omy this week.

The medium-term bud­get pol­icy state­ment, which forms the frame­work for the fi­nance min­is­ter’s an­nual bud­get, has never been re­vised since South Africa adopted a three-year bud­get­ing cy­cle 15 years ago. The be­hind-the-scenes re­vi­sion by gov­ern­ment is also a big de­par­ture from the trans­par­ent prac­tice of get­ting in­puts from Par­lia­ment and ex­tra­parlia­men­tary lobby groups such as civil so­ci­ety, unions, busi­ness and other in­ter­ested par­ties.

It also comes ahead of a se­ries of im­por­tant meet­ings in which the eco­nomic cri­sis will take cen­tre stage. The ANC’s na­tional ex­ec­u­tive com­mit­tee will in the next week con­vene its be­gin­ning-of-the-year lek­gotla, which will be fol­lowed by the Cabi­net lek­gotla a few days later. While prepa­ra­tions for up­com­ing mu­nic­i­pal elec­tions will dom­i­nate the ANC lek­gotla, it is ex­pected the econ­omy will re­ceive greater at­ten­tion than it has in the past.

Fi­nance Min­is­ter Pravin Gord­han, who was ap­pointed in De­cem­ber fol­low­ing David van Rooyen’s four-day stint in the job, said the re­vi­sion showed that gov­ern­ment was “not sit­ting back” in the face of the do­mes­tic and global eco­nomic crises.

“We are work­ing ... hard be­hind the scenes to en­sure that we be­gin to take South Africa in a dif­fer­ent di­rec­tion,” said Gord­han.

While he would not go into de­tail about the re­vi­sions tak­ing place be­hind the scenes, he said the pic­ture would be­come clearer when Pres­i­dent Ja­cob Zuma de­liv­ered his state of the na­tion ad­dress (Sona) on Fe­bru­ary 11 and Gord­han pre­sented the 2016/17 bud­get two weeks later.

“If the num­bers need to change, then the num­bers will change as we go for­ward, be­cause we recog­nise that since the [bud­get state­ment], cir­cum­stances have changed, both glob­ally and within South Africa it­self,” he said.

In his al­ready grim bud­get in Oc­to­ber, Nene warned of low growth, lim­ited em­ploy­ment growth, a weak cur­rency rais­ing in­fla­tion­ary pres­sures, fi­nan­cial mar­ket volatil­ity and ris­ing bor­row­ing costs on in­ter­na­tional mar­kets. He also high­lighted elec­tric­ity-sup­ply con­straints, low con­fi­dence lev­els and an out-of-con­trol pub­lic sec­tor wage bill.

Since then, South Africa has re­ceived down­grades from two rat­ings agen­cies, the World Bank has dropped its 2016 growth fore­cast for the coun­try, both the US and South African cen­tral banks have hiked in­ter­est rates, sta­tis­tics have re­vealed a sig­nif­i­cant last-quar­ter dip in min­ing pro­duc­tion and the drought has played havoc with the agri­cul­tural sec­tor. In ad­di­tion, the value of the rand de­clined by 6% since the be­gin­ning of Jan­uary as a re­sult of Chi­nese-led tur­moil among emerg­ing mar­ket cur­ren­cies af­ter the rand was bat­tered in De­cem­ber due to panic about Zuma’s un­ex­pected sack­ing of Nene. Gord­han said the re­vi­sion was un­avoid­able. “It’s quite clear we need to take ac­count of the new en­vi­ron­ment in which we find our­selves and make sure we tai­lor our ex­pen­di­ture and rev­enue de­ci­sions in line with the cir­cum­stances,” said Gord­han.

He added: “They ... are very com­plex. The world is in a ter­ri­ble place as we speak. There are com­plex dy­nam­ics im­pact­ing on emerg­ing mar­kets at this point in time, in­clud­ing on our own chal­lenges, as we have ad­mit­ted them, very frankly.” Min­is­ter in the Pres­i­dency Jeff Radebe said this week that re­sources had to be shifted from some pro­grammes to ad­dress burn­ing is­sues such as the drought and the ter­tiary ed­u­ca­tion de­mands of the #FeesMustFall move­ment.

“All those en­gage­ments that hap­pened in gov­ern­ment and with other stake­hold­ers have re­sulted in us shift­ing the funds in or­der to ac­com­mo­date [#FeesMustFall], be­cause ed­u­ca­tion is the fu­ture of South Africa; we can­not just sit down and not do some­thing to ad­dress the gen­uine con­cerns stu­dents raised last year,” said Radebe.

Another headache gov­ern­ment is fac­ing is that its R5 bil­lion con­tin­gency emer­gency re­serve has been gob­bled up by last year’s pub­lic sec­tor wage hikes, thus mak­ing it im­pos­si­ble to de­clare the drought a na­tional dis­as­ter.

Agri­cul­ture Min­is­ter Sen­zeni Zok­wana said gov­ern­ment had di­verted R300 mil­lion to­wards drought re­lief and added that the coun­try’s re­serves would be hit fur­ther by the need to spend R20 bil­lion on maize im­ports.

Gord­han said the coun­try’s eco­nomic cri­sis, which could “cre­ate im­mense dif­fi­cul­ties for all at the end of the day” could last for some time.

“I think we need to ex­plain to South Africans that the world finds it­self in an ex­traor­di­nar­ily dif­fi­cult en­vi­ron­ment,” he said.

Down­play­ing talk of a loom­ing re­ces­sion, Gord­han said a ma­jor prob­lem was that “we are not solv­ing the prob­lems of in­equal­ity and un­em­ploy­ment and poverty in our coun­try ad­e­quately”.

Depart­ment of trade and in­dus­try di­rec­tor­gen­eral Lionel Oc­to­ber said the most ur­gent pri­or­ity was to “give con­fi­dence to the mar­kets that we are man­ag­ing the fis­cal and mon­e­tary pol­icy very well”.

This mes­sage would be con­veyed through the con­tent of the Sona and the bud­get, he said. He cau­tioned that there would be no quick fixes to the cur­rent cri­sis.

“We must think long term. If you are look­ing for quick so­lu­tions, then get into pol­i­tics, not eco­nom­ics. You have to sow if you want to reap.” He warned against the ten­dency to panic. “Every time the rand goes up or down, or the gold price goes this or that way, we get into a state of panic. We must de­velop a long-term per­spec­tive, and that is what the [Na­tional Devel­op­ment Plan] was all about.”

South Africans also did not have a com­mon un­der­stand­ing of the eco­nomic prob­lems.

“The prob­lem is we have a lot of de­bates about so­lu­tions and the blame game is strong. Some claim busi­ness is un­pa­tri­otic, gov­ern­ment is cor­rupt and the unions are stok­ing labour un­rest. We must have a com­mon anal­y­sis of our core prob­lem,” he said.

He said South Africa’s low growth was linked to in­equal­ity, as low wages con­strained con­sumer de­mand.

“Be­cause of in­equal­ity, we are not grow­ing. We must agree our real prob­lem is de­pen­dence on min­eral com­modi­ties and low wages.

“Every coun­try that has de­vel­oped has got out of that trap. We are stuck in that trap. Peo­ple are mis­di­ag­nos­ing the prob­lem by blam­ing mine work­ers for de­mand­ing higher wages.”

Cosatu pres­i­dent Sdumo Dlamini told City Press the labour fed­er­a­tion would go to the ANC lek­gotla with the mes­sage that the gov­ern­ing party’s al­lies should be re­spected when for­mu­lat­ing so­lu­tions.

Speak­ing shortly af­ter Zuma ig­nored Cosatu’s protests about a new tax law, Dlamini said “we must as al­liance part­ners ap­proach meet­ings in an hon­est way, and en­sure that in that en­gage­ment we re­spect each other”.

He slammed those who blamed South Africa’s eco­nomic woes on high wage de­mands and warned that so­lu­tions “should not be at the ex­pense of al­ready op­pressed work­ers who are on the lower end of the econ­omy”.

“It is not fair to ask work­ers how they feel about the econ­omy, which is in a cri­sis. Work­ers have been in an eco­nomic cri­sis for as long as I can re­mem­ber. Wages are too low. We are sit­ting on 25% un­em­ploy­ment; we are faced with huge in­equal­ity and in­abil­ity to find jobs ... Now we have a global eco­nomic sit­u­a­tion, which peo­ple want to blame on work­ers,” he said.

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