It's up to Gigaba to rebuild trust and confidence in mini budget - Coovadia

2017-10-16 14:52 - Liesl Peyper
Banking Association of South Africa MD Cas Coovadia. (Photo: Matthew le Cordeur)

Cape Town – The motives behind government’s failure to act in the national interest should be questioned as it undermines trust and service delivery in South Africa, Cas Coovadia, managing director of the Banking Association of South Africa (BASA), said on Monday.

Coovadia in a statement called on Finance Minister Malusi Gigaba to show leadership and use the tabling of the medium-term budget policy statement on October 25 as an opportunity to fill the void and acknowledge the leadership crisis.

“In a climate of ongoing poor economic growth, it would be irresponsible for government not to use the MTBPS (mini budget) to put clear and decisive steps that encourage national and global private sector investment on the table.

“Without this, it remains all but impossible to meaningfully address fiscal constraints and the expected shortfall in tax revenues that will continue to impact service delivery and the poorest of the poor - who remain marginalised because of the consistent inability to address the crisis in which we find ourselves.”

Gigaba will deliver his maiden budget speech in a week’s time, in a period of extreme uncertainty on an economic and political level in South Africa amid glaring revenue shortfalls, ever-increasing debt to GDP and allegations of state capture at state-owned enterprises.

Coovadia in his statement was scathing about President Jacob Zuma’s midnight Cabinet reshuffle at the end of March this year, saying his actions halted the positive initiatives of the CEO Initiative, which had worked hard to engage rating agencies to avoid a credit rating downgrade.

“[The] trust which had been built [was] destroyed through the president’s actions … It must now fall to government to rebuild the trust.”

In March, Zuma sent shudders through the economy when he removed former finance minister Pravin Gordhan and his deputy Mcebisi Jonas and replaced them with Malusi Gigaba and Sfiso Buthelezi, respectively.

In the immediate aftermath, the rand lost more than 10% against the dollar and rating agencies Standard & Poor’s and Fitch downgraded South Africa’s sovereign credit rating to junk status.

Coovadia at the time said he had no choice but to say the reshuffle was not in the best interests of the country. “We are also left with little choice but to question the motives behind this action.”

The specific change in the finance ministry, he continued, created a dire loss of institutional knowledge and raised legitimate and alarming concerns regarding issues of fiscal discipline and the protection of institutions.

In Monday’s statement, Coovadia urged Zuma to act immediately to appoint a judicial commission of inquiry into state capture.

“[The] ongoing issues at Eskom and SAA (South African Airways) are indicative of continuing state capture. Of particular concern in this regard are the recent allegations of attempts to capture the Public Investment Corporation (PIC), including the persistent attacks on the CEO of the PIC (Dan Matjila),” Coovadia added.

“This is a serious extension of the state capture narrative and must be resisted. It has become urgent to address the scope and scale of state capture, the scourge of corruption and the lack of leadership action that impacts delivery.”

Eskom has been the subject of scandals ranging from governance issues, corruption at management level and the clinching of illegal contracts with Gupta-linked companies.

SAA on the other hand has been paralysed by debt obligations, and there are serious doubts about the airline's ability to operate as a going concern without another capital injection from government.

Gigaba is expected to reveal exactly how much the airline will receive in what would be its third bailout this year in his mini budget speech.

Coovadia cautioned that the mini budget cannot be seen in isolation from the broader context. It is therefore up to Gigaba to instill confidence, trust and certainty and act in the national interest by taking the hard decisions necessary to put South Africa onto an inclusive growth path.

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