Without the benefit of scientific analysis I can’t say for sure that Tito Mboweni’s pre-Davos media presentation generated more headlines than the one hosted by President Cyril Ramaphosa a year ago.
Perhaps it’s an indication of the changed environment. More likely it was just Mboweni being himself. He was on form, and as straightforward as always.
Treasury director-general Dondo Mogajane tried to dodge a question about what Team SA would tell its audience at the World Economic Forum (WEF) this week about the dire state of the country’s finances by simply pointing out that the budget presentation will take place on February 26.
It did sound hardly credible that when asked by potential investors about the budget deficit, Eskom and public wage bill, ministers would simply show them dates on the calendar.
But as it turned out, the maverick — some say ill-disciplined — finance minister wasn’t going to have any of that. Coming some time after many in the room would have assumed that Mogajane had had the last word on this point, Mboweni’s forceful response felt almost unprompted.
The wage bill, he said, was among the most serious risks to the country’s finances and therefore the broader economy (not exactly a state secret). But what was slightly startling was his statement that a plan had to be devised and agreed upon before the February budget.
That doesn’t sound credible either, and if it’s what is needed to avoid the abyss we are really in trouble. The infighting in the ANC is barely hidden, and it would take an incredible dose of optimism to think the sort of decisions needed to turn this ship around can be agreed, let alone turned into something credible that can be implemented, in the next month.
The market is mostly resigned to SA losing its investment-grade credit rating in the aftermath of the budget. The only debate is about how violent and prolonged any sell-off in the bond market will be.
In some ways the ANC now faces the same problem as the Labour Party in the UK
While Reserve Bank governor Lesetja Kganyago will always, as he did last week, insist that policy is based purely on inflation and growth considerations, rather than what credit ratings will do, the decision to take the plunge last week and cut interest rates may also indicate that he sees such a downgrade as being already priced into the market.
The fiscal picture isn’t looking any less grim. Based on projections in the medium-term budget policy statement unveiled in October, the country’s budget deficit will balloon to about 6% for the current fiscal year, leaving debt as a proportion of GDP at about 60%, on track for 80% in less than a decade.
The days when Trevor Manuel was finance minister and that ratio was about 20% seem like ancient history, but it was only a decade ago. Manuel’s success ironically gave the Zuma government the room and opportunity to open the fiscal taps when the financial crisis hit. But those who followed him did not know when to stop.
In some ways the ANC now faces the same problem as the Labour party in the UK. Let Thabo Mbeki replace Tony Blair — leaders whose flaws no-one needs reminding of. The problem is that those flaws have left some of their successors unable to celebrate, and therefore claim their successes, with any degree of enthusiasm.
When some point to the Mbeki-Manuel-Mboweni era as a period of sound economic management and growth, one characterised by material improvement in the collective welfare, a big section of the ANC now, aided by its alliance partners in Cosatu and the SA Communist Party (SACP), see a capitalist “class project” with no redeeming features.
Party hijacked
The current Labour party cannot see past Blair’s Iraq blunder and some of the hated elements of “New Labour” such as its love affair with the Murdoch press, centralisation of control to the exclusion of ordinary members and its addiction to political spin. So when the Conservatives characterise Labour as economic incompetents who brought nothing to the UK other than the financial crisis that broke out in 2007, they have no defence.
To point to the long period of unbroken growth, improvements in the health service or sharp declines in child poverty would be to praise Blair, so they unwittingly collaborate in the perpetuation of Tory governments, something they seem set to carry on doing. They allowed their party to be hijacked by ideological purists who still see the world in the old “Left versus Right” paradigm, while anyone who shows any kind of pragmatism is dismissed as “neoliberal”.
In SA they are agents of “white monopoly capital”. It’s a slight surprise we haven’t gone back to talking about the “Washington consensus”. For these people, Mboweni is a relic from those days, so it will be a hard sell for him to convince anyone in Davos that he can win over his critics within the ANC.
Morally, it’s hard to defend the idea that we should just keep on adding to the debt burden while resisting the kind of changes that might deliver an economy capable of supporting greater levels of spending.
The path we are on means that as long as they still keep lending to us we will keep giving greater sums to bond holders in London and New York instead of using those resources to build schools and hospitals. But that’s not the message that’s getting through to those in the ANC who dislike the messenger and have an eye on taking back control of the party.
Discouraging Mboweni from making the argument lest it offends those who won’t listen anyway won’t get us anywhere. We might as well enjoy his candour while we still can.
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