DUMA GQUBULE: Treasury and Reserve Bank are putting Ramaphosa’s re-election at risk

Over the past month the Treasury and Reserve Bank have announced an austerity budget and an increase in interest rates. This will impede President Cyril Ramaphosa’s recovery plan and dash hopes that the ANC will have a good story to tell about the economy when he goes to his party’s national conference at the end of 2022 to seek another term as its leader, and to the national polls in 30 months.

Sunday Times editor S’thembiso Msomi put forward two nightmare scenarios for the ANC. The first is that the party will fall below 50% at the national polls in 2024. The second is that Ramaphosa may not be re-elected in 2022. “The tide is turning against him, even among those who were vociferous in campaigning for his presidency. Many simply don’t believe he has the ability to arrest the decline, pointing out that his individual popularity failed to enthuse voters.” Under this scenario, the party may implode if Ramaphosa is recalled and its share of the vote would plunge well below 40%.

I do not understand how the president could be so committed to economic policies that are guaranteed to result in rising unemployment over the next few years that he would be prepared to risk losing the party and national elections. The only way out is to confront the power of the Treasury and Reserve Bank and implement policies that will revive the economy.

The Treasury has become a superministry. Since Trevor Manuel stepped down in 2009 SA has had seven finance ministers. All have implemented the same policies of structural reform and austerity, which have not worked. In 2019, when David Masondo, a member of the SACP, was appointed deputy finance minister he was reined in and had to toe the line after making comments about monetary policy. Recently, finance minister Enoch Godongwana joked that the only difference between him and his predecessor, Tito Mboweni, was their shoes.

It is as if the tail is wagging the dog, and Treasury officials are more powerful than their ministers, and even the ANC. After all, there is no ANC resolution that says there must be structural reforms and austerity. This is undemocratic.

Part of the ANC’s renewal must include increasing internal democracy so that the government’s economic policies reflect the will of its members. Though recent budget documents say it is the cabinet that sets economic policy and not the Treasury, it frequently seems like the institution is even more powerful than the president.

In September 2018 Ramaphosa announced the establishment of a R400bn infrastructure fund. In February 2019 the Treasury reduced the fund’s size to R100bn. Three years after the announcement the Treasury has made no allocation. The fund has no money. In April 2020 Ramaphosa announced a R500bn stimulus package to respond to the pandemic-induced recession. This included R100bn that would be spent on job creation.

According to my calculation, only R140bn of the stimulus materialised. On-budget spending was R60bn. Off-budget spending was R60bn, covering money the Unemployment Insurance Fund paid to people who were temporarily unemployed, and R20bn banks disbursed to businesses as part of the failed loan guarantee scheme. The presidential employment stimulus, which was part of the on-budget spending, received R23.6bn.

But during the recent medium-term budget policy statement the president was in the same boat as activists who are campaigning for the extension of the social relief of distress grant and the introduction of a basic income grant. The policy statement said: “Decisions on the presidential employment initiative and additional funding for social grants beyond the current year are dependent on revenue outcomes and will be announced in the 2022 budget.”

The time has come for a discussion about the role of the Treasury and Reserve Bank, and the power of unelected officials.

Correction: November 30 2021

A statement by finance minister Enoch Godongwana was wrongly attributed to Alexander Forbes economist Isaah Mhlanga.

• Gqubule is founding director at the Centre for Economic Development & Transformation.