Gigaba: 'We couldn’t tell people everything is fine'

2017-10-26 20:28 - Liesl Peyper
Finance Minister Malusi Gigaba (Picture: Gallo Getty)

Cape Town - "We couldn't do a Comical Ali on the nation and tell people everything is fine." 

This is how Finance Minister Malusi Gigaba responded to criticism of his mini budget speech on Thursday during a parliamentary briefing in which he and National Treasury Director Dondo Mogajane gave feedback on the Medium-term Budget Policy Statement delivered on Wednesday. 

("Comical Ali" is the nickname of Mohammed Saeed al-Sahhaf, a former Iraqi Information Minister under Iraqi President Saddam Hussein, acting as the spokesperson for the Arab Socialist Ba'ath Party and Saddam's government.)

Opposition parties and analysts have criticised Gigaba's budget speech for lacking substance and direction and deviating from the fiscal consolidation path set out by his predecessors. 

Gigaba however was adamant that he delivered an honest and candid message, telling it how it is. 

"We couldn’t tell people everything is fine. Then you’ll be the first person to believe your own lie and you become complacent. I think the majority of South Africans appreciated that the story was told as it is. If you want to play tricks because you want to see good headlines and read good stories and reviews of the lies you’ve told – then you go and say 'all is well'."

He added that he and his officials had to be the "bearers" of bad news. "I admire National Treasury for their inability to come to me and lie. And sorry to those who hoped we would give a glimmer of hope by lying." 

Gigaba's first mini budget painted a gloomy picture of South Africa's economic realities. Low economic growth (down to an expected 0.7% this year) has resulted in serious risks, such as a "low-growth trap".

In addition, the projected revenue shortfall was higher than expected at R50.8bn (for the 2017/18 budget), resulting in an increasing budget deficit and a substantial debt risk hike. At about 15%, debt repayment costs are already the biggest budget item.

Gigaba also denied that National Treasury has abandoned fiscal consolidation as some had claimed. 

Kicking the can down the road? Absolutely not 

Democratic Alliance (DA) spokesperson on finance David Maynier asked Gigaba if he wasn't merely "kicking the can down the road" in his budget speech. 

"It was a brave attempt to set out the facts and the subliminal message appears to have been that you as finance minister are standing up to the president. But isn't it the truth really that government is paralysed and that you've delayed the hard decision, calculating and hoping Jacob Zuma is no longer the president by February?"

Gigaba denied that government is "paralysed" as Maynier suggested. 

"I don’t entertain that perception. And to suggest because there’s an ANC conference (in December) there’d be a new president by February - I don't know where that comes from. I have no reason to respond to that."

SOEs must stop running to government for money like it's an 'uncle'

In his response to members of Parliament's questions about the high compensation of the boards and executives of state-owned enterprises (SOEs), Gigaba said the "debate" (about SOE staff's remuneration) needs to be finalised. 

"We can’t keep on raising that flag, because create uncertainty. (Prospective) candidates will ask themselves: 'Should I accept this job if my income may be cut simply because I’m the CEO of an SOE?'"

Gigaba said SOE CEOs' salaries are benchmarked and capped according to the "size and scale of the specific parastatal".

"But that’s why I said in my speech, we pay well at SOEs and therefore we can demand and expect more. We can’t continue to pay well and the return on investment is bailouts, guarantees and so forth. That honestly is wrong. We need to address governance challenges." 

He added that SOEs should stop viewing government as "an uncle" that will dish out money when needed. A member of Parliament then asked Gigaba why an uncle, and not an aunt, to which he responded: "An aunt is stricter than an uncle."  

Gigaba said on Wednesday that government was not in a position to bail out Eskom if its current turnaround plan did not succeed. 

“Government is not a nanny that must just provide government guarantees whenever,” he said.

Eskom, which is government’s single biggest contingent liability with R350bn worth of government guarantees extended until 31 March 2023, had become too much of a risk.

The recapitalisation of South African Airways to the amount total of R10bn is one of the reasons why the country runs the risk of breaching the expenditure ceiling by R3.9bn. The guarantees are government's major explicit contingent liabilities.

* Visit our Mini Budget Special Issue for all the news, views and analysis.

SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.

Read Fin24's top stories trending on Twitter: