HILARY JOFFE: Nhlanhla Nene has his work cut out to regain ground

Old new Finance Minister Nhlanhla Nene has made it clear that he only took the job because President Cyril Ramaphosa twisted his arm.

Nene, it seems, would rather have carried on helping out in his wife’s market garden and enjoying the board posts at Allan Gray and Thebe Investment Corporation to which he was appointed after he was so unceremoniously fired from the finance ministry more than two years ago.

And who would blame him? Nene’s reappointment might have come as something of a surprise, but it has been welcomed by the markets. It will be seen by many not only as a strong appointment in itself, because of Nene’s depth of experience and technical competence as well as his unquestioned integrity, but also as one that is an endorsement of the Treasury, opening the way for it to return to the way it used to be.

But Nene knows he is taking on much harder challenges than those he left and that he is walking into some big battles.

Over those two years, the economic growth rate has averaged well less than 1%, revenue collections have fallen short by more than R80bn, the hole in the public finances he was trying to correct has grown incrementally larger and SA’s credit rating has been brought to the brink of all-round junk status.

Nene will have to implement plans to tackle SA’s ballooning public debt, which at almost R2.3-trillion is more than four times what it was before the 2008-09 global financial crisis.

He will have to implement the tough plans announced in the budget to rein in public spending, which has already had to accommodate an extra R57bn for free higher education and could be derailed by an above-inflation public sector pay settlement.

The political challenges for Nene could be as tough as the economic and fiscal ones and will be key to whether he can get on top of the last-mentioned ones.

Nene will have to tackle the crisis in tax administration and tax compliance that has helped erode revenue collections. The sooner he finds a way to get rid of South African Revenue Services commissioner Tom Moyane and put in a credible, capable replacement, the faster he will be able to start doing that. He will also have to try to fend off the huge risks to the fiscus posed by crisis-ridden state-owned enterprises, particularly Eskom.

But following his predecessor Malusi Gigaba’s efforts to tackle those challenges in recent weeks, Nene is walking into a few big new troubles. Most immediate of these is the pushback from political, labour and community groups against the percentage point increase in the value-added tax (VAT) rate Gigaba announced in the budget.

Parliamentary hearings this week will allow for the dissent to be voiced. But the dissenters include some senior folk in the ANC itself, and at this stage the VAT increase that is so essential to the government’s fiscal consolidation plan is by no means a done deal.

He may well face pushback from the national, provincial and local government leaders as well as the public entities such as SARS whose budgets have been slashed.

The political challenges for Nene could be as tough as the economic and fiscal ones and will be key to whether he can get on top of the last-mentioned ones. His stature was enhanced by his previous stint as finance minister, during which he stood up to Zuma on nuclear and insisted on the need for sound fiscal policy.

However, Nene is not a member of the ANC’s national executive committee and is seen as relatively junior in the party, as is his new deputy, Mondli Gungubele. By contrast, the Presidency has been staffed by ANC heavy hitters David Mabuza and Nkosazana Dlamini-Zuma, and in other economically important ministries too there are members who are more senior. That raises the question of how powerful a finance minister Nene will be able to be. Without Ramaphosa’s unconditional support, holding the line could be very tough.

Crucial too will be whether he can rebuild the Treasury’s relationships with other departments, relationships that have been eroded by the fragmented and conflictual policy-making of the Zuma era, as well as by the suspicions it bred of the Treasury.

If the economy is to get back on track, greater coordination must replace the Zuma-era fragmentation of decision-making. Nene and the Treasury will have to work with other departments such as public enterprises and education, as well as economic development, trade and industry, energy and water if they are to be able to support higher growth and investment and ensure coherent fiscal policy-making.

Closest to home for Nene will be the challenge of rebuilding the Treasury itself. The department has lost several highly experienced officials, most recently budget office head Michael Sachs and director-general Lungisa Fuzile.

As the budget documents show, the engine room is still running well and there are good people there, but the Treasury doesn’t have the same depth of experience, nor does it carry the weight it used to.

Bringing back those who left would risk causing further disruption, but there must be scope for Nene to bring in some highly regarded advisers and to boost some of the Treasury departments. For now, fixing SARS might be more urgent.

But Nene will have plenty in his inbox — and he will want to choose his battles carefully.

• Joffe is editor at large.