HOW TREA­SURY GOT ITS TEETH

Since the dawn of democ­racy in SA, Trea­sury has flexed its mus­cles. But it has been a source of divi­sion for the ANC and its al­lies. Af­ter Nenegate, push­back against pres­i­den­tial over­reach has put Trea­sury back at the apex of au­thor­ity. This makes next we

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This year, like ev­ery year, the an­nual rit­ual of the bud­get speech will of­fer a re­minder of the sig­nif­i­cant power that Na­tional Trea­sury has in de­ter­min­ing some very ba­sic facts of life in South Africa. There is also a deeper sig­nif­i­cance to Wed­nes­day’s speech. It will be the first de­liv­ered by Fi­nance Min­is­ter Pravin Gord­han since his re­turn to Trea­sury fol­low­ing the dra­matic re­moval of Nh­lanhla Nene and the brief stint by his re­place­ment, David “Des” van Rooyen.

This drama, as ev­ery­one knows, sparked wide­spread out­rage. It also in­vig­o­rated pub­lic sen­ti­ments around the pre-em­i­nent role of Trea­sury. The sharp fall of the rand and sud­den down­turn in mar­kets that fol­lowed Nene’s re­moval left no doubt about the piv­otal po­si­tion Trea­sury oc­cu­pies in the state.

While its cen­tral­ity is widely ac­knowl­edged, what is less of­ten ques­tioned is ex­actly how this came to be the case. Just how did Trea­sury rise to be­come such a pow­er­ful state in­sti­tu­tion?

Build­ing Trea­sury, build­ing the state

When the ANC came to power in 1994, it in­her­ited a frag­mented bu­reau­cracy. Struc­tures of pub­lic fi­nance re­quired ma­jor re­form: rev­enue col­lec­tion, ex­pen­di­ture con­trols and fi­nan­cial ad­min­is­tra­tion were splin­tered across apartheid’s var­i­ous state struc­tures, with lit­tle mon­i­tor­ing or over­sight.

The coun­try’s first demo­cratic Con­sti­tu­tion set out a road map to trans­form the fis­cal struc­tures of the coun­try. Most cru­cially, in sec­tion 216, it out­lined the need to es­tab­lish a cen­tralised Na­tional Trea­sury to per­form a co­or­di­nat­ing role in the emerg­ing in­ter­gov­ern­men­tal sys­tem.

With the cre­ation of a new sys­tem of pro­vin­cial and lo­cal govern­ment, Trea­sury’s po­si­tion at the heart of state was ce­mented. It be­came the cen­tral dis­penser of the “eq­ui­table share”. It also be­came a cru­cial for­mu­la­tor of pol­icy, con­sti­tu­tion­ally em­pow­ered to “pre­scribe mea­sures to en­sure both trans­parency and ex­pen­di­ture con­trol in each sphere of govern­ment”.

Trea­sury over­hauled the bud­get­ing process, in­tro­duc­ing a mul­ti­year frame­work and a range of bud­get fo­rums to open up the process. To stan­dard­ise fi­nan­cial man­age­ment across govern­ment, it in­tro­duced the Pub­lic Fi­nance Man­age­ment Act in 1999, which pro­foundly changed the pub­lic ser­vice, im­prov­ing the avail­abil­ity of in­for­ma­tion and the prac­tices of re­port­ing. Through this, Trea­sury gained over­sight pow­ers over ev­ery or­gan of state.

Trea­sury it­self un­der­went far-reach­ing in­ter­nal con­sol­i­da­tion to bol­ster its in­sti­tu­tional ca­pac­i­ties. Over the course of the 1990s, the twin apartheid de­part­ments of fi­nance and state ex­pen­di­ture – poorly co­or­di­nated and gov­erned by ar­chaic sys­tems – were grad­u­ally merged to form the new Na­tional Trea­sury. By the decade’s end, Trea­sury had emerged as a pow­er­ful, stream­lined en­tity with mul­ti­ple spe­cialised di­rec­torates.

It at­tracted per­son­nel of strong cal­i­bre, and it was dis­tin­guished by its low staff turnover and high lev­els of in­ter­nal pro­mo­tion. Con­ti­nu­ity and sta­bil­ity came to un­der­pin its in­sti­tu­tional strength.

Many of the core of­fi­cials of “Team Fi­nance” – most also mem­bers of the ANC – have been al­ter­nately de­ployed in var­i­ous struc­tures in the fis­cal and mon­e­tary land­scape. When Gord­han was ap­pointed min­is­ter of fi­nance in 2009, it was af­ter hav­ing served as the com­mis­sioner of the SA Rev­enue Ser­vice for al­most a decade.

In the 1990s and into the new mil­len­nium, Trea­sury was a key flag bearer of cen­tral state-build­ing. Its au­thor­ity was not sim­ply ce­mented by its con­sti­tu­tional man­date and strong in­sti­tu­tional ca­pac­i­ties, how­ever, but also by pow­er­ful sup­port from the ANC’s ex­ec­u­tive, par­tic­u­larly the coun­try’s deputy pres­i­dent and, later, pres­i­dent, Thabo Mbeki.

Trea­sury as a con­tested in­sti­tu­tion

The kind of hi­er­ar­chi­cal, tech­no­cratic co­or­di­na­tion Trea­sury un­der­took was em­blem­atic of Mbeki’s ap­proach to state-build­ing. And just as Mbeki’s cen­tralised ap­proach came to at­tract strin­gent crit­i­cism, so Trea­sury’s role was highly con­tested.

Crit­i­cism of Trea­sury was tied to the par­tic­u­lar macroe­co­nomic stance it came to pro­mote. Con­trary to many of the ANC’s elec­tion prom­ises of in­creased so­cial spend­ing, Trea­sury em­pha­sised re­straint in govern­ment spend­ing and a re­duc­tion in the deficit. Sen­si­tiv­ity to the dis­ci­plin­ing power of in­sti­tu­tions of global cap­i­tal pro­foundly shaped Trea­sury’s pol­icy man­dates – a pre­vail­ing eco­nomic or­tho­doxy that con­tin­ues to le­git­imise its ac­tions.

In 1996, we saw the in­tro­duc­tion of the Growth, Em­ploy­ment and Re­dis­tri­bu­tion (Gear) pol­icy, which at­tracted sting­ing crit­i­cism from the ANC’s al­liance part­ners. Gear not only em­pha­sised fis­cal aus­ter­ity and a dis­tinct out­ward fo­cus, it her­alded a par­tic­u­lar in­sti­tu­tional vi­sion with Trea­sury at the helm of state, along­side the pres­i­dency and other cen­tral de­part­ments. Mbeki shielded then min­is­ter of fi­nance, Trevor Manuel, in the fall­out that fol­lowed the an­nounce­ment of Gear, and smoothed the path for the as­cen­dance of Trea­sury and its man­date of fis­cal con­ser­vatism.

Trea­sury has not sim­ply been crit­i­cised for the macroe­co­nomic stance it em­bod­ies, but also be­cause of the way it ex­er­cises power. Civil so­ci­ety has chal­lenged the ac­ces­si­bil­ity and demo­cratic en­gage­ment of bud­get pro­cesses (most no­tably through the peo­ple’s bud­get cam­paign), and ques­tions are raised about the gen­uine­ness of fis­cal au­ton­omy in the coun­try’s sub­na­tional gov­ern­ments, as well as the ef­fec­tive­ness of Trea­sury’s tech­no­cratic poli­cies of top-down, com­pli­ance-driven fi­nan­cial man­age­ment re­forms.

As the 2000s pro­ceeded, Mbeki’s model of cen­tralised power be­came the source of in­creas­ing divi­sion within the ANC. This reached a break­ing point at the ANC’s 2007 elec­tive con­fer­ence in Polok­wane. Trea­sury was not spared crit­i­cism. In the run-up to Polok­wane, Trea­sury un­der Manuel was la­belled “too pow­er­ful” by fac­tions within the gov­ern­ing party, and par­tic­u­larly also by its al­liance part­ners, labour fed­er­a­tion Cosatu and the SA Com­mu­nist Party.

The post-Polok­wane era was a land­scape more hos­tile to Trea­sury. The provinces, paras­tatals and the pres­i­dent in­creas­ingly tested the lim­its of its reach.

The fir­ing of Nene in De­cem­ber last year was, how­ever, the most di­rect at­tack on Trea­sury’s au­thor­ity.

In his first and only state­ment as fi­nance min­is­ter, Van Rooyen tried to tap into long-held views of Trea­sury’s inac­ces­si­bil­ity. Yet his as­ser­tion of the need to “open up” Trea­sury was read cyn­i­cally. The in­ci­dent was in­stead seen as a brazen dis­play of pres­i­den­tial uni­lat­er­al­ism.

De­fend­ing Na­tional Trea­sury be­came a de­fence against the pres­i­dent’s ar­bi­trary ex­er­cise of power and creep­ing cor­rup­tion. It was this is­sue that united op­po­si­tion par­ties, civil so­ci­ety and busi­ness lead­ers, rather than una­nim­ity over Trea­sury’s poli­cies or modes of gov­er­nance. The re­turn of Gord­han has brought with it re­newed prom­ises of deep­ened fis­cal re­straint – likely to be con­firmed by next week’s bud­get speech. While re­straint has been a com­mon re­frain of post-apartheid bud­get speeches, Trea­sury is in a stronger political po­si­tion than in the re­cent past. It will con­tinue to have to ne­go­ti­ate its au­thor­ity, how­ever, as the full con­se­quences of eco­nomic down­turn are felt in all sec­tors of so­ci­ety.

With its con­tin­u­ing power to de­ter­mine some of the very ba­sic facts of life in South Africa, a role ce­mented in the ear­li­est years of the demo­cratic state, Na­tional Trea­sury will con­tinue to be a site of con­tes­ta­tion in the years to come.

Pear­son and Pil­lay are re­searchers at the Pub­lic Affairs Re­search In­sti­tute, which has be­gun a sus­tained study of Na­tional Trea­sury and its role in state-build­ing dur­ing the

tran­si­tion. An early re­port drawn from ini­tial in­ter­views with se­nior of­fi­cials in Trea­sury, of­fi­cial doc­u­ments and a range of sec­ondary lit­er­a­ture is avail­able at pari.org.za. This

ar­ti­cle brings to­gether some of the re­port’s key find­ings

PHOTO: HER­MAN VER­WEY

HER­ITAGE SITE

The Her­bert Baker-de­signed build­ing in Pre­to­ria that to­day houses the Na­tional Trea­sury

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