Fiscal anarchy looms after axing of Nene

ONE of the stories behind the term “white elephant” is that it comes from Asia and relates to albino elephants that were regarded as sacred. The owner would have to pamper it and give it special food. So as a form of punishment, Thai kings would give an unlucky subject an albino elephant to look after and maintain — a gift that would more than likely cause the recipient’s ruin.

Given the ambitions of many a politician, one can only imagine the grandiose plans that cross the desks of finance ministers in almost every region of the world. Admittedly, here in Africa, we’ve had out fair share of dreamers over the past few decades.

The task of the National Treasury is to avoid such “gifts”. We are fortunate that our constitution commits the department to service South Africa’s debts before any money is spent on salaries or palatial homesteads.

For the most part, this duty of the Treasury has been respected. It has always asked the right — and often difficult — questions of the politicians and the heads of state-owned enterprises who come to it for money.

For some this fiscal scrutiny might be irritating and unwelcome, but without it, you can only imagine how many white elephants we’d have in our backyard.

As an arbiter in the allocation of the country’s resources, which are shrinking because of low commodity prices and weak domestic growth, the Treasury has done well.

But apparently not everyone would agree. What happened this week is that one man decided that the barriers to the national kitty were too troublesome and so he removed its political principal.

Without input from his cabinet and without considering the fallout, President Jacob Zuma did the unthinkable.

It’s his prerogative, we know that.

So let’s just assume that Nhlanhla Nene and his department were blocking Zuma’s ambitions to leave a nuclear legacy. The constant back and forth between the Department of Energy and the Treasury about affordability was becoming a bit of a drag for a president hellbent on a nuclear future.

But the manner in which he has gone about clearing the obstacles in no way helps his ambitions.

Since the medium-term budget statement in October, South Africa has been downgraded and bond yields have risen sharply. Our debt costs — which, remember, the Treasury is bound by the constitution to service before any other expense — have gone up.

So given the budget deficit and the current account deficit — which has to be financed — the amount left over for allocation to other items has shrunk further.

In these conditions, which are clearly constraining spend, a government’s job is to address the factors that are driving debt

Pursuing the nuclear and SAA projects will affect the poorest

costs and to deal with the deficits. And in doing so, it should free up resources to spend on a populace living with one of the highest unemployment rates in the world. (Or in the case of Zuma, to spend on a nuclear plan and of course on an unclear restructuring plan for SAA.)

But the axing of Nene and the deployment of an amenable replacement has sent the rand diving even further, while bond yields have ratcheted higher.

This has only shrunk the size of the cake. Pursuing the nuclear and SAA projects will affect the poorest of the poor, who rely on grants. And whence now will come the extra billions of rands needed to pay for student fees?

Given the protests of recent years, can the ANC selfishly be OK with the captain’s new course?