Spotlight on Gordhan
New finance minister’s speech will signpost SA’s economic direction
ALL eyes will be on Finance Minister Pravin Gordhan when he spells out the government’s spending priorities in Parliament on Tuesday.
Every word Gordhan utters will be keenly dissected: he will be delivering his first Medium Term Budget Policy Statement since stepping into former finance minister Trevor Manuel’s shoes in May.
He’ll be taking centre stage against a backdrop of a continuing global financial slump, a domestic recession and massive demands on state coffers to find the resources needed to meet the promises laid out in the ANC’s elections manifesto.
Watching from the wings will be the ANC’s allies, Cosatu and the SACP, big business and ordinary South Africans. When Manuel delivered his last medium-term review, he warned of storm clouds gathering, but said the prudent policies of the past had put the country in a good position to weather the turbulence.
Since then, the country has dipped into recession, revenue from taxes has plummeted as a result and jobs have been shed.
But while the amount of money available to the government has shrivelled, demands on the fiscus have grown – as have people’s expectations. And behind the scenes, a contest is under way over economic policy – the direction it should take, and who should drive it.
Gordhan’s speech will give a sense of what choices have been made in terms of meeting the competing demands of health, education, crime fighting, rural development and job creation.
He’s also expected to expand on his determination to plug the holes in the state purse caused by weak controls and fraud and corruption.
“He must talk to the wastage, the need for us to get value for money – there are so many leakages,” said Cosatu president Sdumo Dlamini.
“There must be a tough message about how we stop the leaks – the corruption, the issues of unmandated expenditure – because we are in recession.”
Dlamini said Cosatu wanted particular attention paid to health – including the proposed National Health Insurance scheme – as well as fighting crime, rural development and education.
“We must not have a framework that seeks to put aside the steps agreed on, though we can anticipate a slow phasing in. President (Jacob) Zuma said in his State of the Nation address that there would be no deviation from the (manifesto promises), except in the pace (of implementing them).
“We expect a re-prioritisation of programmes because of the realities of the economic situation,” Dlamini said.
Economist Iraj Abedian of Pan African Investment Hold- ings said Gordhan’s presentation would be the “most closely watched” Medium Term Budget Policy Statement of the past 15 years. As a new finance minister, Gordhan would be watched to see how he’ll place his stamp on the landscape.
“Gordhan hasn’t shown his cards yet. He’s made statements in Parliament to the effect that he’s not going to loosen the purse strings.
“So if he’s going to be true to his own brand, he will have to come up with a balance between what is doable and what is desirable, emphasising affordability and sustainability”.
Gordhan’s greatest difficulty lay in the collapse of fiscal revenue, with the projected shortfall from tax income now estimated at R80 billion, and rising.
Zuma and his Cabinet had “set themselves up to deliver on a large scale”, Abedian said.
“It will be revealing to see to what extent political rhetoric will be translated into actual financial commitment.”
Gordhan also has to navigate a sea of expectations: from the ANC’s allies, Cosatu and the SACP for significant economic policy shifts in support of a developmental state; from citizens frustrated at service delivery and local government failures; and from business anxious to see new initiatives to help them ride out the recession.
The rand weakened against the dollar this week after a report claimed Economic Development Minister Ebrahim Patel planned to “freeze” the currency, among other “radical proposals” he was said to be hammering out with Higher Education Minister Blade Nzimande.
The report was swiftly denied. But the fact that Patel is a former trade unionist and Nzimande is the general secretary of the SACP conspired to feed jittery investors’ fears of a leftward leap in economic policy.
Answers will only be forthcoming as Zuma’s new administration emerges from the transition with clearly defined mandates and responsibilities for future policy determination.
That point has yet to be reached. But Gordhan’s speech on Tuesday will signpost the road ahead.