Pulling the plug on funding may save SA

Posted 07 September 2016 Written by Gumani Tshimomola
Category Politics

President Jacob Zuma is not one to back down from a fight, particularly one where he was humiliated. In this case, he was forced to appoint Pravin Gordhan as his finance minister after trying to shoe-horn a hopelessly unqualified Des van Rooyen into that post. In this article, Gumani Tshimomola, a researcher for the Economic Freedom Fighter's parliamentary caucus, explains why the decision by certain investors to stop funding SA's state corporations may save SA in the long run.

It is clear that the conflict between President Jacob Zuma and Finance Minister Pravin Gordhan has never stopped since Zuma was forced to reverse his appointment of Des van Rooyen to the post. To believe the official line that they are both on the same page would be politically naive. Whatever the motives, it is clear that the gloves have been off from the start.

The ceasefire we saw in May was a necessity while the government engaged with the ratings agencies to prevent a credit downgrade to junk status. What I hear from people who have worked closely with the old man is that he never backs down from a political fight. His personality, which is misunderstood by many people, causes Zuma to lurch from one scandal to another.

The decision by asset manager Futuregrowth and a smaller Danish counterpart to pull the plug on funding for state-owned enterprises (SOEs) due to political uncertainty and the speculation that more moneylenders will follow suit to limit the resources available to SOEs is unfortunate but may be necessary to curtail some of the undesirable projects the government has decided must be carried out by SOEs.

Despite advice from the Treasury to put the nuclear build programme on hold due to its potential to put serious strain on the fiscus, both Eskom CE Brian Molefe and Energy Minister Tina Joemat-Pettersson are hell-bent on proceeding.

The newly reappointed chairwoman of South African Airways, Dudu Myeni, is rapidly flying the national carrier into the ground. Perhaps these and many other examples of poor governance and financial mismanagement can be prevented if the government is unable to borrow more money.

The August 3 elections reaffirmed a continuing trend, which has seen the ANC losing popularity among young urban voters. Come 2019 there is a real chance the ANC will be reduced to a rural party unless there are far-reaching changes to its structure, policies and leadership, which is rather improbable.

It is now up to the Treasury — led by Gordhan if he is not arrested by the Hawks — to review the SA’s fiscal policy, in particular guarantees and transfers to state-owned entities, and to present an honest medium-term budget policy statement in October, without trying to please everyone by ignoring the reality of what we face as a country.

With such limited resources at our disposal, in particular reduced access to credit markets to cover the budget shortfall, there is a need for serious reprioritisation and discontinuation of inefficient and unaffordable government programmes.

It is time that the government built internal capacity to deliver services in a far more efficient manner.

The fees crisis confronting higher institutions of learning cannot be left unresolved — the government must make available appropriate funding for free quality education for all, beginning in the 2017 academic year.

Most importantly, it is now vital that the state begins to take strategic control of the economy so that its direction is not dictated by fund managers such as Futuregrowth and foreign banks, and so that the government is able to implement decisive and radical policies aimed at the redistribution of resources, a reduction in unemployment and the elimination of poverty.

If it is true that the Brics bank is willing to pour billions of rand into the SOEs in their current form, despite their governance and financial management failures, combined with Zuma’s character flaws outlined above and the ANC’s internal political squabbles, SA is headed for trouble.

In the words of ANC Gauteng chairman Paul Mashatile, the ANC is "heading for calamity of unprecedented proportions".

Unfortunately, it is not only the ANC that will take the brunt; it is the young, poor, unemployed, workers, the so-called middle class and pensioners who will suffer most.

Tshimomola is a senior researcher for the EFF’s parliamentary caucus. The article first appeared in Business Day.


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