Budget Watch

Budget 2017, expect a cacophony of noise

Gordhan, lead singer on Wednesday?
PravinGordhan.jpg

One will need a political surround-sound system to properly follow the dramatic opera, called Budget 2017, to be staged this Wednesday at the Parliamentary theatre in Cape Town.

There is só much political, and some other, noise around that it is going to be a huge challenge to decide what to concentrate on.

The scene-setting overture already started last week, suggesting possible high drama, when it was announced that the crybaby from another drama, called the Public Protector’s state capture report, ex-Eskom CEO Brian Molefe, is about to become an ANC member of parliament.

This immediately caused many political opera pundits to interpret it as a sign that conductor and director in chief, Jacob Zuma, is about to rob the man who is supposed to be the lead singer on the day, Finance Ministers Pravin Gordhan, of his thunder.

It is unlikely that a man of Molefe’s stature, background and experience would be brought onto the parliamentary stage as a mere member of the rent-a-crowd extras. The Molefe-announcement was immediately seen as concrete sign that Zuma is about to make some changes in his top cast, called the cabinet – with Molefe in a key, probably economic or financial role.

He might even soon take over Gorhan’s role or at the very least the important supporting role of deputy-minister of finance with a brief to ensure that Gordhan sticks to the script written by director Zuma himself.

If that happens there is a real danger that some of the more influential supporters and patrons, some of them called international investors, might withdraw their support. The money of a good number of local investors are also likely leave the country for theatres on other shores.

Another, more positive outcome is, however, also possible if one takes a look at Molefe’s CV, which besides his stint at state enterprise Eskom, also includes deployments as head of the Public Investment Corporation, the public pension fund asset manager, which is the country's most powerful investor and senior official at the National Treasury.

In his own, somewhat disrupted, parliamentary theatre performance, called the State of the Nation Address, Zuma promised a stronger role for government in the development of local industry and support to small and medium enterprises as part of the larger programme of black economic empowerment.

In that context, and considering his controversial role in the state capture drama and relationship with Zuma’s Gupta friends, there are a number of other portfolios which could be a natural fit for Molefe, including: Economic Development, Energy, Public Enterprises, Small Business Development, Trade and Industry and maybe Mineral Resources.

A combination of some of these portfolios is, of cause, also possible, and none of these positions should upset Mr Zuma’s friends.

The Molefe-announcement, and particularly its timing less than a week before the

“Gordhan show,” and keeping in mind that Mr Zuma makes cabinet appointments, might just also have been intended as a message from the ‘conductor’ to all, to  “remember who is the boss around here.”

More noise

However, the noise does not stop with the Molefe-announcement. There is plenty of controversy at present surrounding the SA Social Security Agency (Sassa) and its expiring contract for the distribution of social grants to some 17 million South Africans at the end of March, with a war of words raging between Gordhan and Treasury on the one side, and Social Development Minister Bathabile Dlamini and her department on the other side.

While Gordhan has suggested that the banks might take over the distribution of social grants the news of an announcement by the Competition Commission of its finding of collusion between major banks, could not have come at a worse time for Gordhan. In this regard it must be remembered that there is still an outstanding court case between him and the Guptas regarding the role of the banks.

And then there is the newly revived controversy from the apartheid-era Reserve Bank bailout of ABSA and the ANC Youth League’s campaign that Treasury must intervene.

One 3 February President Zuma’s son Edward, a close associate of the Guptas, released an aggressive statement in reference to the Sassa issue claiming: “ Once again, we are being taken for a ride by the gurus of white monopoly capital assisted by Pravin and cronies.” (Our emphasis.)

The ANC Women’s League weighed in with a statement of its own rejecting “unashamedly any proposal that the payment of Southern African Social Security Agency (SASSA) grants to be outsourced to one of the major commercial banks.”

Tax and state finance

So far, we have not even dealt with all the political and special interest noise, and it is already clear that it would not be easy to, in a detached, neutral way, consider the proposals that will come with regards to the tax regime and finance of the state for the next twelve months.

Against the background globally of financial globalisation and the trend toward automatization of production processes and open trade borders putting inclusive economic growth and domestic economies under pressure, it would be interesting to listen for signs of also a more protectionist approach in the budget.

It is difficult to see how Minister Gordhan, also informed by the inputs from his cabinet colleagues, could totally ignore what has recently happened to the poultry industry locally. Similar pressures are building in other sectors and last week for instance the steel industry indicated a more protectionist approach towards itself.

Pressure has been building for some time in the education sector around issues like university fees and lobbying for a totally free education dispensation, posing some tough challenges for Minister Gordhan and the Treasury. Student activists are likely to pay keen attention to the delivery of the budget.

In other sectors, there will also be attention from both activists and business people to determine if and how measures will be implemented to give effect to the conductor in chief’s promise of “radical economic transformation.”

Will there be some indication of moves in terms of government procurement budgets, one of the areas indicated by Zuma to be used as a “transformative,” and if so what will be done to prevent it from just becoming another example of cronyism?

Considering that in less than eight weeks, on 7 April Moody’s will be the first of the international ratings agencies to announce their ratings update on South Africa, one cannot help but feel sympathy for the lead singer on Wednesday in parliament.

For those of our readers that will be following the budget on Wednesday at the theatre itself or on radio or TV – happy listening and hoping it will not confuse you too much.

by Piet Coetzer

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