Fin24 21 June 2020
Finance Minister Tito Mboweni is a man who is not above using humour to get a sincere point across. He also does not believe that he should hold his tongue simply because his views are diametrically opposed to the views of institutions he represents.
As he prepares to submit his supplementary budget speech in Parliament next week, he does not appear to be shying away from his views, even if they are unpopular amongst his peers. This past week, his followers on Twitter got a glimpse of one such candid moment.
Mboweni shared an image of himself walking alone, in formal wear and functional shoes, and captioned it: “I don’t remember where this was captured. But if loneliness was a person, THIS!”
On Thursday afternoon, Mboweni told the National Council of Provinces during a virtual meeting that if South Africa did not change its spending behaviour, the country would fall into a sovereign debt crisis by 2024 and be forced to go to the International Monetary Fund for help.
The Reserve Bank forecasts that the SA economy will contract by as much as 7% this year. The South African Revenue Service said in May that the state’s revenues were likely to see a projected loss of R285 billion, relative to collections projected in the February budget.
However, while Mboweni is used to being the lone voice where it relates to policy, a number of experts believe that Cabinet and the African National Congress-led government are willing to put ideological differences aside and play nice with Mboweni.
Political analyst Somadoda Fikeni said the Covid-19 pandemic, which necessitated that Mboweni prepare and table a supplementary budget, has pushed leaders in government and the ANC to put narrow interests aside as they continue to plan their response to the outbreak.
“The first thing is, ideologically, there are those who have been opposed to him speaking his mind instead of taking a conservative position. The economic conditions brought on by Covid-19 have caused a shift on some of those matters,” said Fikeni.
Former partner and CEO in Sub-Saharan Africa of Goldman Sachs, and senior fellow and lecturer at the Jackson Institute for Global Affairs at Yale University, Colin Coleman said government found itself in an unprecedented situation of revising the budget midyear due to an economic and health crisis.
“In Parliament yesterday (Thursday), the finance minister warned of a potential blowout of debt to beyond 100% of GDP by 2024. He has now to achieve two things. One, he has to find the money to fulfil promises made on expenditure on health and Covid economic relief,” said Coleman.
Coleman said Mboweni then had to lay the groundwork for the medium-term budget speech in October to present a credible medium-term fiscal consolidation plan against the backdrop of slowing growth and rising debt.
Luxuries and needs
Mboweni has been vocal about his stance against government giving bailouts to failing state-owned entities, despite the fact that the ANC and President Cyril Ramaphosa have expressed that government should not give up on these struggling parastatals.
However, during a meeting with Goldman Sachs in April, Mboweni said government would “do whatever it takes” to ensure the survival of the debt-laden Land and Agricultural Development Bank. He has also been in open support of the establishment of a state bank since last year.
Fikeni said issues, including SOEs and other troubled entities, would become less contentious among leadership in the near future, as leaders acclimatise to “a reality where there is too little money and there is no luxury of an option to finance all things”.
Hands are tied
Professor Matthew Ocran, of the University of the Western Cape, however believes that “political economy dynamics” are holding us back from doing what we need to do to lift growth. “I am quite sorry for the minister, because he knows exactly what needs to be done but he is unable to do it.”
Referencing Treasury’s discussion paper on economic reforms, which was released last year, Ocran said there was a lack of “political will” and “energy” to implement these changes. “The minister’s options are very limited. They have the answers. The Treasury has all the answers. It is about the energy and commitment to move forward with that,” he said.
Ocran fears that we might be pushed to multilateral institutions such as the World Bank and the International Monetary Fund for bailouts, and these institutions will in turn still require that we implement structural reforms anyway.
“We cannot just focus on the post Covid-19 recovery. We must look at structural issues that have driven the economy to where it is now and we need to tackle that,” he said.
His own man
As for finding common ground amongst his colleagues, Fikeni said it was in Mboweni’s nature as a person to speak his mind and yjay he might have been emboldened as a person because of his history at leading independent state institutions like the South African Reserve Bank.
“I do think at this moment, people will put aside their difference and will not want to rock the boat. They would rather work with him and some might see the wisdom in what he has to say. Some might be bold enough now to speak up for his views,” Fikeni said.
Business Leadership South Africa CEO Busi Mavuso said differences between individuals in the ANC and government have often been shown starkly in the form of leaked discussion documents, one of which made headlines as recently as two weeks ago.
“I think a further framing of the government’s phase three plans would be great. We know a leaked ANC document on the economic approach to Covid made the rounds, but we need to know if that is indeed government’s document or if that is just within the ANC,” said Mavuso.
Failure is no option
Fikeni said the ANC believed a lot was riding on the outcomes of the government’s interventions and that Mboweni could be seen as a saviour or would be blamed, depending on the success of those interventions as they back his approach.
“If his interventions, in terms of the new budget, see the ANC through this challenge and the reforms work, it will save the ANC. If this does not work, they might even turn to blame him for what may have gone wrong,” he said.
On a broader economic level, Coleman said South Africa needed to execute on a growth plan that will map the way for sustainability and consolidation. Driving conditions for unlocking private sector investment and confidence is central to such a plan, he said.
“The politics of the alliance means any short-term austerity measures will likely be opposed. The minister is threading a needle through the constrained fiscal, economic and political space, which is extremely constrained,” he added.