Will cutting Zuma's fat save SA from junk status?

2016-02-21 18:47 - Xolani Mbanjwa, Justin Brown and Dewald van Rensburg
President Jacob Zuma. (Walso Swiegers, Bloomberg) ~ Bloomberg

Johannesburg - Slashing the size of President Jacob Zuma’s bloated Cabinet came up as one of many measures that business raised for the first time with government at a recent meeting that could help avert a credit rating downgrade, City Press reported on Sunday.

“The issue of the size of the Cabinet was raised,” a source close to the meeting, which was held in Cape Town, said on February 9, just ahead of President Zuma’s State of the Nation address.

Another executive, who attended the meeting but wished to remain anonymous, said: “He [Zuma] didn’t answer that question. He skirted it a bit. He said: ‘Look, we’re going to look at it, we’ve got measures to look at continued cost cutting.’ But you and I know that he’s got an election coming up and to get rid of ministers would not sit well within the ANC.”

The cost of government in general and the lack of fiscal discipline are increasingly becoming issues amid the state’s worsening financial position, and as the risk of a downgrade of the country’s credit rating to junk status increases.

Zuma promised business representatives at the Cape Town meeting that government would look into cutting the size of his Cabinet to saves costs, according to sources who spoke to City Press.

Jabu Mabuza, Telkom chairperson and leader of the business sector’s implementation team, confirmed that the question about the size of the Cabinet was raised.

He said the suggestion made by business was presented as a mere “symbolic gesture” that would not make any difference to the economic challenges facing the country.

Mabuza said the suggestion was unlikely to make the final cut of the proposals, which would be tabled at a meeting with government in May.

He said it was incorrect to isolate the point business made about the size of the Cabinet from the whole debate.

“We have to do one of two things – reduce costs or be more fiscally disciplined, but also increase revenues. To isolate the one point might also get people talking,” he added.

“I think that while some of the action can be symbolic, some of it would not move the needle that much. Some actions may be a display of restraint,” Mabuza said.

The topic of restraint addresses a key issue raised recently in a Moody’s Investors Service note on South Africa.

“We could revise the rating outlook to stable [from negative] if policymakers were able to maintain spending restraint despite the accumulation of spending pressures,” Moody’s said.

On the other hand, Moody’s said that a lower commitment to fiscal restraint implying a higher than expected rise in government’s debt burden could lead to a downgrade.

Kyle Mandy, tax policy leader at PwC, said that, while Zuma had said government would cut costs through various means, including slashing travel and catering costs, cutting the number of government departments and ultimately the number of seats in the Cabinet would save the country billions.

READ: Government must trim Cabinet to save billions - PwC

“We need to reduce costs, and to do that, government has said it will freeze posts, but those posts are critical to service delivery. The size of government has increased in the past eight years and government expenditure has increased from 27% of the gross domestic product to 34% in that time. If we want to save billions, we need to cut unnecessary departments. We need to look deeper at duplicated departments and analyse whether departments are inefficient,” said Mandy.

Those who attended the meeting said the general view among business was that Zuma needed to streamline his Cabinet and remove or merge inefficient departments.

Presidency spokesperson Bongani Majola declined to comment on the discussion when approached this week.

Zuma increased the size of government to 35 departments in his first term as president, which started in 2009.

There were 28 departments at the end of Kgalema Motlanthe’s term as president in 2009.

Zuma also increased his Cabinet to 75 people, made up of the president, deputy president, 35 ministers and 38 deputy ministers – up from 57 during Motlanthe and Thabo Mbeki’s terms.

Enoch Godongwana, the ANC’s head of economic transformation, said: “Even if we were to reduce Cabinet to 10, it would not make any significant impact either on debt or on growth levels. I think people are trying to raise a peripheral issue.

What we should be discussing is what, together with business and government, those key levers of the economy are that we can touch to stimulate growth. That should be the discussion.”

READ: Why Budget won’t save SA from ratings downgrades