BLSA sees junk risk
TREASURY RESIGNATION: UNDERMINES THE INSTITUTION’S CREDIBILITY
Parliament must approve budget, not the presidency, say business leaders.
Business Leadership SA (BLSA) CEO Bonang Mohale says the departure of National Treasury’s long-standing budget head Michael Sachs is “of enormous concern” as it adds to an exodus of expertise at the institution, which “undermines” its credibility.
Treasury confirmed on Monday that Sachs, who has been at the institution for eight years and headed the budget office responsible for crafting the national budget, had resigned.
“Sachs is another in a line of admirable and competent professionals leaving what is arguably our most important ministry tasked with the economic wellbeing of the country,” said Mohale.
Although Treasury didn’t explain the reason behind his resignation, media reports suggested he resigned last week due to President Jacob Zuma’s interference in the institution’s fiscal and budgetary policymaking process.
Zuma is pushing for a free higher education policy for students of families earning a combined annual income of not more than R350 000. The policy would cost a constrained fiscus R40 billion and put Treasury’s budgeting process under significant strain. The Presidency has denied this.
Mohale warns that Treasury’s latest leadership change comes before credit rating agency Moody’s publishes its review of SA’s sovereign credit rating on November 24. A downgrade to junk of SA’s foreign and local currency debt by Moody’s would be catastrophic, as SA could lose its spot in Citigroup’s World Government Bond Index.
Treasury’s budgeting process has been delegated to the presidential fiscal committee (PFC), overseen by Zuma. “In his medium-term budget policy statement, Minister Gigaba told us about a new structure in the Presidency to oversee expenditure in the Treasury. We at BLSA are of the view that this could violate the constitution,” said Mohale.
He said parliament carries the ultimate responsibility for approving the budget, not the presidency. He added that sections 215 and 216 of the constitution ensure transparency and expenditure control, including “the right of the Treasury to stop the transfer of funds to organs of state in the face of serious or material breach of proper financial management”.
“This latest development raises further concerns over the politicisation of the Treasury and budget process and sends the wrong signal to the people of SA.”
If Zuma pushes his policy, it would undermine Treasury’s role in keeping a lid on government spending and wasteful expenditure and finding the best ways to grow the economy.
Since Zuma’s Cabinet reshuffle in March, Treasury has been rocked by leadership changes. Along with the axing of finance minister Pravin Gordhan and his deputy Mcebisi Jonas, director-general Lungisa Fuzile resigned and deputy director-general Andrew Donaldson retired.
“Both the director-general [Dondo Mogajane] and I are aware of protecting the integrity and transparency of the budget system and process, and ensure that all tax and expenditure decision processes continue to be run by the Treasury and minister of finance, and continues with the consultative process introduced by the first democratic government,” Gigaba stated.