Gigaba’s balancing act, shows the political and managerial depth required to navigate our economic waters

Image: South African finance minister Malusi Gigaba delivered his maiden Medium-Term Budget Policy Statement in Parliament on Wednesday. PHOTO: PHANDO JIKELO / ANA PHOTO

Malusi Nkanyezi Gigaba MP, as many commentators have agreed, is in a tight spot. As the minister of finance read the Medium-Term Budget Policy Statement, South Africans fast gained knowledge of the results of a stagnant economic policy implemented since the late nineties. Based on the insistence of these economic policies, our economy has simply not grown enough to yield material results nor been restructured to become inclusive. 

We must thank the ancestors though for Minister Gigaba. His name seems to suggest that he is just right the person to lead South Africa out of this quagmire. In Africa, the names bestowed on us means much and therefore we must be appreciative of the fact that ‘malusi’ means ‘shepherd’ while ‘nkanyezi’ is a star.

As many commentators would suggest South Africa faces a doom and gloom but Nkanyezi seems to have lived by his name of shining light amidst the troubles that we face as a country. In the twilight years of the Zuma administration, the Nyankezi generation seems to be indicating to South Africans that, given the challenges, we would need to make some hard decisions to get the country out of a situation of stagnation.

Like a true shepherd, he was able to highlight and emphasize the priority: the development of our people must be the purpose of our unity. One could not help but notice his appealing to his cabinet colleagues, signalling out their names, telling the country what they were doing, together, and setting a tone that speaks to uniting South Africa.

Whereas as his erstwhile foe, Derek Hanekom sought division, malusi demonstrated to colleagues that before we could call on government, business, labour and civil society to unite, cabinet itself had to unite to ensure the development of all peoples.

Commentary, by and large, would have and did concentrate on the estimated R50 billion shortfall in tax collection. Yet for Gigaba this is not so much of a concern than the development of South Africans. Quoting a number of times economist and Nobel laureate for economics, Amartya Sen, Gigaba pointed out that the fruits of freedom are enjoyed through ensuring people’s capabilities being maximized.

Gigaba is aware, for example, that frequently large chunks of budgets, especially in departments such as basic education, cooperative governance and traditional affairs, and even social development, are returned to the Treasury unspent. For example, in the previous financial year nearly a billion and a half Rands of the social grants budget went unspent because those who were meant to apply for them simply did not.

What this means for the fiscus is savings but what it means for poor South Africans trapped in poverty is a nightmare even though our nyankezi pointed out that two-thirds of fiscal spending goes to realizing social rights. Other savings will no doubt, come from real structural changes such as the establishment of a state bank and a state construction company.

Take for example, another figure from the last financial year, of nearly a billion Rands spent by the South African Police Service on building leases when the state construction company can simply construct these buildings themselves. This intervention will then also disrupt the kind of ill practices that we have witnessed in the construction sector over the past two decades. In fact, given Gigaba’s encouragement of competition as well as the nearly trillion Rands investment in infrastructure over the next three years, the establishment of this company is all the more urgent.

Malusi must guide the country through the necessary reforms. At pains to always use ‘inclusive growth’ and ‘radical economic transformation’ together, the minister must realize that, for example, China is able to yield its current projected growth rate of seven percent, post the 2008 global economic crisis, simply because, as reported by the Chinese ambassador to South Africa, China has introduced somewhat 1200 different reforms since the crisis. The economics philosophy is simple: we either adapt or wither.

Real structural changes need to happen to ensure that people’s capabilities, as articulated by Sen, are realized. Unfortunately, the National Development Plan: Vision 2030 does not propose any structural changes and therefore cannot serve as a blueprint for our shepherd. As a country, we will have to do better than that and the recent call by ANC Deputy-Secretary General, Jessie Duarte, for a CODESA on the economy is one such method of developing a common future for all South Africans.

However, Minister Gigaba pointed out that three structural factors continue to hamper our economic transformation. Firstly, direct Black ownership and management in economic activities remain relatively low. In other words, White monopoly capital continues to dominate. Secondly, employment equity, through the participation of Blacks, women and the disabled, continues to be stalled. Put differently, even if we produce skilled Black people through free university education the structure of the economy does not absorb skilled Blacks. Finally, market concentration, low competition and high entry barriers continue to sketch a picture of an oligopoly.

We are hoping that malusi will not lead South Africa into the path of social cuts and mass privatisation. As he pointed out, much of the recent statement announced, laid the groundwork for the finer details to be read in the 2018/19 Budget. The selling of the shares in Telkom must raise a concern not only because the state, the people, will be losing part of their ownership in this company but also because we are selling an asset of which we don’t know whether it will cover the debt we wish to avoid. Simply put, there is no guarantee that the price the Telkom shares will fetch will actually cover SAA’s bailout.

However, the enormous efforts made by the South African Revenue Service and the Financial Intelligence Centre into monitoring financial outflows from the country and into foreign entities must also be commended. This is long overdue given the nearly 50 to 60 billion Rands that South Africa loses on an annual basis given these illicit outflows. These measures should have been introduced in the nineties already when recapitalisation of the titans of the country’s economy took place.

Our shepherd and star gives us reason to be hopeful. Yet he will soon realize that the prophets of doom and gloom abound and he will find them nowhere else but in the Houses of Parliament. Minister Gigaba must understand the political undertones of his appointment. He was appointed to usher in radical economic transformation and those who oppose this explicitly, made themselves known in the House before the statement was read. Therefore, the formula is simple, either he listens and kowtows to them or shepherds South Africa, out of this night, as its star.

Wesley Seale, teaches Politics at Rhodes University and is a PhD Candidate at Beijing University, China