Hum­bug prom­ises

Cock­tail of eco­nomic re­al­i­ties make ANC elec­tion guar­an­tees un­re­al­is­tic

Finweek English Edition - - Openers - TROYE LUND

THE ECO­NOMIC and bu­reau­cratic cock­tail that the new Ja­cob Zuma-led ANC gov­ern­ment will in­herit and have to work with is messy. So much so that the party’s sweep­ing elec­tion prom­ises to ramp up pub­lic spending and then chan­nel it through an ef­fi­cient, state-of-the-art pub­lic ser­vice that will start meet­ing peo­ple’s needs – es­pe­cially health, ed­u­ca­tion and safety – look naïve, if not in­sin­cere po­lit­i­cal hand-wav­ing.

The cur­rent eco­nomic re­al­i­ties form the cock­tail’s base in­gre­di­ent. The ANC fails to even men­tion those in its man­i­festo. The truth is that the new gov­ern­ment’s fi­nan­cial abil­ity to use so­cial wel­fare to ad­dress poverty and un­em­ploy­ment – South Africa’s most se­ri­ous eco­nomic prob­lem – is go­ing to be con­strained. While the eco­nomic slow­down and high inflation rates will in­ten­sify the need for so­cial as­sis­tance, vot­ers are be­ing promised ex­panded so­cial se­cu­rity and “mas­sive” pub­lic in­vest­ment that’ll cre­ate 5m new jobs over the next five years.

The next cock­tail in­gre­di­ent is the pub­lic ser­vice’s cul­ture of me­di­ocrity that, the In­sti­tute for Jus­tice and Rec­on­cil­i­a­tion warns, stands to foil eco­nomic growth. Then comes the skills deficit, fol­lowed by Par­lia­ment’s paral­y­sis. Fi­nance Min­is­ter Trevor Manuel’s up­com­ing Bud­get might in­tro­duce a stim­u­lus pack­age that will go some way to­wards rec­on­cil­ing the po­lit­i­cal pres­sure he’s un­der to in­crease ex­pen­di­ture by 16% (as the ANC’s elec­tion driv­ers have promised) and the fact that there’s a lot less money to go around.

Word from Trea­sury of­fi­cials is that pru­dence will pre­vail. That means ac­tual al­lo­ca­tions to Gov­ern­ment de­part­ments are more likely to keep abreast with inflation rather than re­flect sub­stan­tial real in­creases. Manuel’s prin­ci­pal call – ex­pected to be for more bang for each bud­get buck – points to the nub of what Team Zuma will be up against.

The truth is that with re­gard to health and ed­u­ca­tion (two of the ANC’s three elec­tion pri­or­ity ar­eas) SA al­ready spends more (as a per­cent­age of GDP) than any other emerg­ing econ­omy. And yet – as the ANC it­self con­cedes – the de­sired re­sults in both de­part­ments are just not there.

Throw­ing more money at the de­liv­ery prob­lem, ac­cord­ing to Ap­plied Fis­cal Re­search Cen­tre’s (Afrec) Ta­nia Ajam, hasn’t nec­es­sar­ily de­liv­ered com­men­su­rate im­prove­ments in per­for­mance – for one main rea­son: there’s no ac­count­abil­ity. And it’s not for lack of sys­tems, agen­cies and stud­ies to point out where the prob­lems are.

The dis­mal per­for­mance of man­age­ment in the pub­lic ser­vice, the lack of dis­clo­sure of per­sonal busi­ness in­ter­ests by politi­cians and top pub­lic ser­vants and the im­pact all that has on fi­nan­cial man­age­ment and de­liv­ery are doc­u­mented and re­ported an­nu­ally to Par­lia­ment by the Pub­lic Ser­vices Com­mis­sion. Sev­eral de­part­ments (big spenders, such as Health and Home Af­fairs, in­cluded) have been re­ceiv­ing con­sec­u­tive qual­i­fied au­dits for sev­eral years.

The au­di­tor-gen­eral re­peat­edly gives detailed explanations of where the se­ri­ous con­tra­ven­tions of the Pub­lic Fi­nance Man­age­ment Act (PFMA) are. But no­body gets fired. No­body is held per­son­ally li­able, as the PFMA al­lows. Par­lia­ment may blow some hot air in Cab­i­net’s di­rec­tion – es­pe­cially in sit­u­a­tions where al­most 2m com­muters start de­mand­ing to know how, for the third year in a row, the Trans­port Depart­ment has this year again failed to meet its con­trac­tual obli­ga­tions to pay bus sub­si­dies.

Trea­sury al­lo­cates spe­cific money for that line item – the big­gest, af­ter the Gau­train. How do chief fi­nan­cial of­fi­cers not an­tic­i­pate the short­fall and sound alarm bells in time for con­tin­gency plans to be made? Par­lia­ment never calls for a min­is­ter’s head. It some­times threat­ens not to pass a delin­quent depart­ment’s bud­get un­til it’s made cer­tain changes. But that’s never ac­tu­ally hap­pened.

Econ­o­mist and Pan-African Cap­i­tal Hold­ing CEO Iraj Abe­dian says the rul­ing party is go­ing to have to draw a line in the sand and have a real zero tol­er­ance at­ti­tude to­ward things such as mis­man­age­ment and qual­i­fied au­dits – ir­re­spec­tive of who’s in charge of that depart­ment.

Last year’s brief pe­riod, where ANC MPs were pub­licly lam­bast­ing min­is­ters for de­liv­ery fail­ures, was a Prague Spring made pos­si­ble in the spell when for­mer Pres­i­dent Thabo Mbeki and his Cab­i­net re­mained in charge of Gov­ern­ment but not of the ANC’s head­quar­ters. Now that the rul­ing party and Cab­i­net leaders are again the same faces, Par­lia­ment has em­barked on a new sea­son of rub­ber-stamp­ing party in­struc­tions.

The ques­tion is: How far, if at all, will the rul­ing party take a Par­lia­ment-com­mis­sioned re­port that calls for elec­toral re­form so that MPs de­pend on vot­ers – not party bosses – for their jobs/re­elec­tion? Without that there’s no in­cen­tive for MPs to hold po­lit­i­cal bosses or their right-hand man­darins to ac­count.

The cholera out­break speaks pre­cisely to the hoary dilemma of in­suf­fi­cient ac­count­abil­ity and mon­i­tor­ing, says Idasa’s Ju­dith Fe­bru­ary. It also speaks, she ar­gues, to the con­se­quences of

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it: Gov­ern­ment de­part­ments bat­tling to ful­fil their core func­tions, de­te­ri­o­rat­ing in­fra­struc­ture and a very weak tier of mu­nic­i­pal gov­ern­ment.

Of course, it also speaks to a des­per­ate lack of spe­cial­ist skills – which has be­come the mantra of all Gov­ern­ment of­fi­cials. For ex­am­ple, in KwaZulu-Natal 70% of all med­i­cal spe­cial­ist posts are un­oc­cu­pied. Va­can­cies in the SA Po­lice Ser­vice means only 12 re­searchers and statis­ti­cians cur­rently serve the en­tire force with crime data. The so­cial se­cu­rity agency that ad­min­is­ters so­cial se­cu­rity pay­ments to 12m South Africans each month is run­ning at a 58% va­cancy rate.

Abe­dian says no sys­tem where there’s uni­form pay­ment and uni­form an­nual in­creases will achieve the kind of pro­duc­tiv­ity the ANC needs to ful­fil its prom­ises. He says pro­fes­sion­al­is­ing and de­politi­cis­ing the pub­lic ser­vice are crit­i­cal to pre­vent­ing a deep­en­ing of the “cul­ture of me­di­ocrity and bu­reau­cratic com­pli­ance”. The IJR’s re­cent Trans­for­ma­tion Au­dit echoes that sen­ti­ment. It warns the state that the sys­tem is cur­rently un­der­min­ing sus­tain­able growth and so­cial de­vel­op­ment.

Fe­bru­ary asks: “Is the (ANC) lead­er­ship strong enough to lead (through those is­sues)? In my view, it’s shown it­self to be weak so far and is led by an in­di­vid­ual (Zuma) that’s be­holden.”

There’s an­other ob­sta­cle to Team Zuma’s prom­ise to hit the ground run­ning when the new gov­ern­ment is sworn in. Move- ment on the OSD is­sue, re­gional elec­tric­ity dis­tri­bu­tion, whether we can af­ford prov­inces or any other is­sue re­quir­ing crit­i­cal de­ci­sion-mak­ing is likely to be non-ex­is­tent un­til about June this year. This hia­tus in bu­reau­cratic ac­tiv­ity is, of course, typ­i­cal in bu­reau­cra­cies wait­ing for the ar­rival of a pres­i­dent and min­is­ters, who, in turn, take time to set­tle, re­view and ap­point their own man­darins and ad­vis­ers. Ajam ex­pects the “When in doubt chicken out” rule to ap­ply to most Gov­ern­ment de­ci­sion­mak­ing un­til mid-year.

This time the chang­ing of the guard also comes with more un­cer­tainty than usual, be­cause there’s lit­tle clar­ity on whether Trea­sury (a source of pre­dictabil­ity for the past 13 years) is also in for some big changes – both in pol­icy and per­son­al­ity. The ANC’s state­ments on eco­nomic pol­icy and its al­liance part­ners’ state­ments on Manuel him­self seem to have taken an oft-con­fus­ing, dif­fer­ent-mes­sage-for-ad­if­fer­ent-day ap­proach.

While Fe­bru­ary says there’s “no sense of a sys­tem­atic han­dover”, Abe­dian says it’s crit­i­cal for the ANC to com­mu­ni­cate and tackle the “mon­u­men­tal chal­lenge” that’s the ma­chin­ery of im­ple­men­ta­tion, which is key to eco­nomic growth and de­liv­er­ing its spoils. There’s also no quick fix. Other coun­tries have shown it takes be­tween seven and 10 years to turn a state bu­reau­cracy from zero to work­ing hero.

troyel@fin­week.co.za

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