Ramaphosa’s most urgent issues
BY NEXT week, President Jacob Zuma should be gone or well on his way. The real business of the ANC’s national executive committee starts this week at its annual lekgotla and he won’t be able to stand in the way of the most important principle that (in theory) defines the ANC’s relationship to the state: “There is only one centre of power and that is the ANC.”
In the face of that principle, any argument that Zuma should be allowed to finish his term will be moot.
In his first televised interview with the South African Broadcasting Corporation (SABC) as ANC president on Sunday, Cyril Ramaphosa took the opportunity to emphasise exactly this point.
He also indicated that the process of Zuma’s departure would be handled with decorum – Ramaphosa intends to disassociate Zuma’s removal from the wrongdoing and abuses he has committed. Those will not be mentioned and we can expect the ANC to thank him for his service.
Zuma’s abuses will be pursued separately by the prosecuting authorities. It is unthinkable that he could escape investigation and prosecution. As Ramaphosa also ominously stated in the SABC interview, those who have done wrong will have to account: “That hour cometh.”
This operating style is typical of Ramaphosa – he does not succumb to the temptation to score cheap political points and prefers clear processes to unfold, which he can observe at arm’s length.
His preference is always for the long, strategic game.
Unfortunately, though, there are two burning priorities, and in both he has no choice but to engage in a hectic race against time.
The first is the hole in the budget, together with the funding of higher education. The second is the threat of disaster at Eskom.
Ramaphosa has held two meetings with Treasury officials since the start of 2018 to discuss the first priority.
Even though the higher education policy was imposed by Zuma through his premature announcement at the ANC conference, the ANC and Ramaphosa have every intention of making good on this promise.
On the table is essentially a hard choice, which Finance Minister Malusi Gigaba will need to present to the party’s lekgotla: raise value-added tax (VAT); raise personal income tax; or do both.
With tax buoyancy having lost its bounce, VAT is the safer choice to raise the guaranteed revenue.
Raising corporate income tax – the solution posed by Morris Masutha, Zuma’s adviser on higher education fees – is not seriously up for consideration.
The political response to a VAT increase is uncertain. In October 2017, Gigaba backed out of having that debate, arguing privately afterwards that the reason he did nothing to plug the funding deficit revealed in the medium-term budget policy statement was that he didn’t have time to negotiate a deal with the ANC’s allies.
Since then, clearly having learnt of the options on the table, the South African Communist Party and Cosatu have publicly warned they would not be happy to see free higher education for the poor paid for by taxes on the poor.
With only five weeks to go until the budget and the idea not having been floated by the Treasury, neither Gigaba nor whoever is the finance minister in five weeks’ time will have that opportunity. Ramaphosa, with his legendary social-compacting skills, has some hard persuading to do, which he may end up having to do after the fact.
Eskom is an even more pressing problem. The company has been shut out of the local lending market and has been unable to raise new funding since October. At the end of December, it missed the deadline to publish its interim results, unable to show it was a going concern.
In mid-February, the power utility will need to refinance a large chunk of maturing debt. Should this not be possible, there would be a risk of defaults and cross defaults in state-owned firms.
Local lenders have made it clear that demonstrable action must be taken on governance, with the board replaced and appropriate executive appointments made. While Eskom and the Treasury hope the plan to issue a $1-billion (R12billion) bond later in January will move the utility out of the woods, what Eskom really needs is a new shareholder minister and a new board in four weeks from now.
In December, when new board appointments were made, ANC economic policy chief Enoch Godongwana tried to persuade several high-calibre executives from the private sector to come on board. All of them said “no”.
Again, Ramaphosa will have to put his powers of persuasion to work.
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