Competent finance minister ensures stability
ONE of the most difficult jobs in SA must be that of running the finance ministry. SA tends to make political appointments to run this ministry and has steered away from appointing financial specialists, technocrats or economists (except perhaps the brief tenure of minister Nhlanhla Nene).
Be that as it may, if that’s the rule, one at least would expect that we pick the right “man” for the job. Pravin Gordhan, the man currently in the seat, is a veteran politician and finance minister, especially in light of our fairly young democracy.
The finance ministry and the South African Revenue Service (SARS) have shared the spotlight in the past six months with the president, unfortunately mostly for the wrong reasons. Negative headlines have focused on the three finance ministers appointed in less than 19 months, the “rogue SARS unit”, the unspoken “potential” battle between the president and the minister, the “battle” between the SARS Commissioner and the minister and the Hawks’ interest in the minister, the ministry and SARS. These very public battles have not been in SA’s best interest, and damaged currency and credit rating prospects. Presidential decisions (whether informed by advisers or not) around the ministry have also done damage.
Gordhan, a pharmacist by trade, was the commissioner for SARS from 1999 to 2009. During his tenure as commissioner, he played a pivotal role in transforming SARS into a world-class revenue authority. This was done through various means, including SARS’ public relations campaigns enforcing the message that taxpayers should file and pay their taxes as “it’s the right thing to do” and “make your contribution to RSA”.
Although noncompliance with tax obligations could result in penalties, interest and imprisonment, SARS managed to drive and increase the “moral obligation” to pay taxes. SARS also (in 2000) initiated its drive to make SARS work better as a business, called Siyakha (“we are building”), through which it set out to increase SARS’ effectiveness by increasing operational efficiency, streamlining and increasing the effectiveness of its organisational structure, and reengineering its underlying business processes; and raising tax morality.
SARS has also made use of technology to enhance business processes which assist SARS in understanding the risk profiles of taxpayers and industries. SARS focuses on employing high calibre people and creating a culture of teamwork and learning — all important elements of Siyakha.
Gordhan also served as finance minister from 2009-14. He has in the past (in the role of finance minister) been criticised that he did not implement sufficient controls to curb public expenditure, corruption, and the budget deficit. On the other hand, Gordhan arguably faired reasonably well in demonstrating stability but could, according to critics, have done better.
Gordhan also managed to instill confidence in himself and the economy, both internationally and locally. In 2014, President Jacob Zuma, as party of his cabinet reshuffle, replaced Gordhan with Nhlanhla Nene. Gordhan then briefly assumed the role as minister of co-operative governance and traditional affairs from 2014-15. Nene lasted for about 18 months as finance minister before Zuma, in a shock announcement, replaced him with David van Rooyen, who held the esteemed position for four days.
These four days were enough to send the rand tumbling and the rating agencies reconsidering SA. In a bid presumably to stabilise the currency, Zuma announced that Gordhan was returning as finance minister. This happened towards the end of 2015, and saw the value of the rand increasing from the lows it reached with the appointment of Van Rooyen just days before.
Just before the budget speech in February, the Hawks sent Gordhan a list of 27 questions around the “rogue unit” at SARS. With recent media attention on the Hawks’ activities around SARS, its “rogue unit”, and Gordhan, the impression may have been created that the minister may not have everyone’s favour. Although freedom of press is mostly welcomed, it could do a lot of damage.
The economy needs stability and that includes stability brought about by retaining our finance minister if he/she is capable of doing the job for a reasonable period of time. If changes are required this should be well-considered and widely considered and the impact on the economic indicators should be managed with care, responsibility, and with no haste.
SA just cannot afford to use this important portfolio to play political football.
Conflicts and investigations into finance ministry’s head, Pravin Gordhan, have not been in SA’s best interest
Ferdie Schneider is head of tax at BDO South Africa.