Posts by NikitaRood

Pravin Gordhan’s Clarion Call

Posted on Mar 17, 2016 in Economy, Politics

Pravin Gordhan’s Clarion Call

SA Finance Minister, Pravin Gordhan, hardly a full two months in the job, stood at the Parliament on Thursday to deliver the toughest budget of the post-Apartheid era. His budget speech had one over-arching objective, and faced many challenges. The strategic imperative was to ward off the looming prospect of the country’s sovereign credit rating down-grade to the junk status. And just moments prior to his speech, Brazil had been downgraded to junk-rating. The Minister made a serious and sobering reference to this fresh development in the global capital market. Ironically, his primary target was the majority of his fellow Cabinet Ministers, the President and his party’s fellow members of the Parliament (MPs) who have proved obstinate over the past seven years – all in the face of irrefutable facts about the loss of investor confidence and evident fall in GDP growth, from the high of 4.2% in 2009 to the current estimated level of 0.5% per annum. The “statist approach” to economic policy, led by the core leadership of the SA Communist Party in the Cabinet, since the inception of the Zuma Administration in 2009 managed to sideline the private sector, capture the institutions of the state and state-owned-enterprises (SOEs), all for their self-interest and political patronage. As a result the balance sheets of the SOEs were hollowed out, their financial sustainability became dependent on the National Treasury’s bail-out, and/or rising guarantees. Consequently, the contingent liabilities of the National Treasury kept rising alongside its public debt. Despite two credit-rating downgrades during 2012 to 2105 period, the Cabinet remained defiant, and oblivious to the socio-political consequences This defiance peaked in December 2015 when the then Minister of Finance, Nhlanhla Nene, was widely reported in the media as having refused to accede to the President and his core political supporters, and he was then unceremoniously sacked and replaced by an unknown back-bencher MP, Des Van Rooyen. This blatant mid-step by the President galvanized some elements of the ruling party together with a core of the private sector business leaders, led by the banking sector chief executives. Within three days, their intervention, market reaction and the huge public outcry compelled the President to replace Mr Van Rooyen with Mr Pravin Gordhan who had established his credibility as the Finance Minister in President Zuma’s first administration during 2009 to 2014. Moreover, Mr Gordhan has an impeccable anti-Apartheid credentials, and is known for his integrity and patriotism. As the head of SA Revenue Services (SARS), from 1999 to 2009, he enjoys much credit for his turn-around of the organisation into an efficient and globally competitive revenue collection office. Against this backdrop, the Minister was resolute in rallying the country’s full capabilities to avert a junk-status downgrade. To this end, he had engaged a select group of financial sector and other CEOs to seek advice – something which had not happened for the past decade. He had also managed to form a sub-committee of sympathetic ministers, under the chairmanship of the Deputy President Ramaphosa, to manage the step-change in Cabinet approach and implementation. At the time of finalizing his Speech, although he had not managed to secure full support for his complete package of policy measures, he had received enough political backing to announce a change of course in government policy going forward. So, he re-affirmed the centrality of the National Development Plan (NDP) – a much neglected private-sector friendly policy framework adopted nearly five years ago. The ‘statist core within the Cabinet” had managed to relegate the NDP to oblivion. More expressly, the Minister re-established the pivotal role of the private sector for...

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