Beyond the numbers, Gordhan's budget will be a political statement

2017-02-22 06:01 - Daniel Silke*
Finance Minister Pravin Gordhan. (Gallo Images)
Finance Minister Pravin Gordhan. (Gallo Images) ~ Gallo Images

Cape Town - One thing we know about Budget 2017 is that the finance minister will be reflecting only a faction of the governing ANC when he delivers his speech in the National Assembly.

Last year, Gordhan was seen as a saviour following the Nene debacle. He was the interim captain of a floundering ship. This year is different.

Although he has acted as a moral and ethical bulwark against a never-ending wave of rent-seeking opposition, he has been worn down of late by several entities within the ANC to delegitimise him personally and even denigrate his commitment to steering the country towards prudent financial management.

READ: Zuma-Gordhan battle takes centre stage in SA budget

Despite a commitment back in October last year that the Cabinet was unanimously in support of Gordhan, recent statements by the ANC Youth League, Women’s League, Umkhonto weSizwe Military Veterans’ Association, the Zuma-linked Progressive Professional Forum, elements at the South African Revenue Service (SARS), the Guptas and even President Jacob Zuma's son Edward have made Gordhan look more and more vulnerable. Add to this mix former Eskom CEO Brian Molefe, who will be sworn in as an MP, and the pressures are building.

In Gordhan’s own words, he is not indispensable. He is there at the behest of the president. But Gordhan now represents much more than just a Cabinet appointee. He represents directly the deep fissures and factions at work within the ANC.

Gordhan has become a conduit of derision for those wanting unfettered access to the state purse strings, and largely now represents the faction calling for prudent fiscal policy in an economic climate of low growth, threatened by rating downgrades.

READ: Molefe's swearing-in on budget day 'premeditated hit on Gordhan'

It is clear that elements within the ANC now require a lighter hand on the fiscus. Whether it is the threat of electoral decline or simply the proverbial patronage network, the party needs to extend largesse to keep its support base intact. With little ability or inclination (or political will) to tackle policy reform, these elements seek to extend their tenure in power by dispensing largesse.

Gordhan is the direct opposite. With a tight hand on the purse strings, he is seen as retarding those patronage-based fiefdoms that have become so de rigueur within the ANC over the past decade. He therefore is likely to continue his refrain of warning the country – and implicitly  – his own wayward party of the consequences of wasteful, corrupt and unnecessary expenditure.

For all the talk of tax-related policy which affects South Africans most directly, outside agencies will be looking at the expenditure side of the budget and our debt to gross domestic product commitments. Gordhan will point to prudent fiscal management over the last year and important government cutbacks in headcount and departmental budgets. He will provide some assurance of an amelioration of debt to GDP levels at 50% and stabilising.

READ: Ratings agencies to keep keen eye on SOE funding

Should he be replaced, it is this issue that is most vulnerable to change. On broad policy issues of reducing inequality, changing ownership patterns and in facilitating much-needed capital to emerging black entrepreneurs, Gordhan will largely be supportive.

After all, this is the mainstay of ANC economic policy. But Gordhan will add a caveat. He will emphasise the need for economic growth as a means to enable a more transformative agenda.

We will look closely to see just how many times – if at all – he mentions President Zuma’s favourite buzzword, “radical economic transformation”. If he avoids it, he will clearly be emphasising growth over large-scale interventionist policies.

How Gordhan deals with the manipulation of currency trade and the prevailing anti-bank narrative will also be important. After all, he needs to tone down the often-manufactured outrage at a sector that, while far from perfect, is a mainstay of the economy and its global linkage.

READ: Collusion case strengthens Zuma's hand in battle with banks

The 2017 Budget though might well be Pravin Gordhan’s last. And not just because his detractors might be seeking his political scalp. Given the deep polarisation within the ANC and his ‘caretaker’ mission, the country might well see a new finance minister within a few months. But this does not necessarily mean that Brian Molefe will step into these shoes.

Molefe might be a talented individual but he is tainted by the State of Capture report. Just as certain factions seek to oust Gordhan, so do others understand the importance of a steady hand on Treasury and a locked larder when it comes to pressures for expenditure.

There may well be countervailing pressures from both groupings which could see Gordhan replaced as part of a long-awaited Cabinet reshuffle, but not replaced by someone compromised by their association with the Guptas.

A cabinet reshuffle is long overdue. The fact that it has been so long in coming reflects the shifting balance of power within the ANC and with that, the waxing and waning of the president’s power as well. As much pressure as there is on Pravin Gordhan, so there is renewed pressure on Jacob Zuma.

Zuma may well act to exert some independence in the appointment of new Cabinet ministers – which is surely his prerogative – but even he may be constrained in the individuals he appoints. This is especially true for a highly sensitive portfolio like minister of finance.

So a more regular exit for Gordhan can be sold as a natural retirement from the position rather than an overt sop to the Guptas or the rent-seeking interests that compete for access to resources. Clearly, the background of any new appointment will attract immense scrutiny and will require broad private sector, labour and even intra-ANC buy-in. The divided nature of the ANC makes such an appointment that bit more problematic.

READ: Molefe coming for Gordhan's job? Not just yet - analyst

Ultimately, South Africa will be watching much more than a budget going through the motion of playing with numbers. This will be a budget that adds to the current political debate in a year of succession. It will be a budget watched even more closely by those who hold our investment grade ratings in the palm of their hand. This will be a budget watched by all South Africans for the extra taxes they may have to pay to compensate for slow growth and policy paralysis.

This will indeed be a budget in which the different strands of the complex political economic puzzle that is South Africa in 2017 will be laid bare. It will tell a story and offer some solutions. Its chief protagonists will bear the responsibility to either listen and implement, or reject and forge a more volatile course into the unknown.

* Daniel Silke is director of the Political Futures Consultancy and is a noted keynote speaker and commentator. Views expressed are his own. Follow him on Twitter at @DanielSilke or visit his website.

* Visit our Budget Special for all the budget news and in-depth analysis.

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