Finance minister Tito Mboweni is said to have been President Cyril Ramaphosa's third choice for the post, after former deputy minister Mcebisi Jonas and Reserve Bank governor Lesetja Kganyago. Nor did Mboweni want the job, as he was at pains to point out to journalists at the medium-term budget. That he reportedly played hard to get is a good start: it would have given him bargaining power, and ideally ensured he had political cover from the president to say some unpopular things and make some unpopular decisions. He will need that cover. Three big and difficult fiscal decisions, which predated him, went into crafting the medium-term budget that Mboweni presented to parliament on Wednesday.
The numbers were dire even with those decisions, and the tough stuff is yet to come - which is why the robust views Mboweni expressed this week on issues such as the public-sector payroll and private-sector participation may be just what Ramaphosa needs. But pushing them through politically will not be easy. The first fiscal decision was to allocate no new money to pay for the extra R30bn that the above-inflation public-sector wage agreement added to the R1.8-trillion public-sector payroll over the next three years. Essentially, the Treasury has told national and provincial departments that finding the money is their problem. But, as Mboweni emphasised, something has to be done about the public-sector payroll. Ramaphosa has committed to no retrenchments, but it's not the head count that's the problem as much as the ever-rising pay levels due to the automatic pay progression many civil servants enjoy each year. Tackling that makes fiscal sense, but is politically charged.
Without higher growth and/or full-on fiscal austerity, SA will keep digging itself further into a fiscal hole.
The second big fiscal decision was to refrain from hiking any major taxes, to avoid damaging SA's growth prospects even further. This is in a context in which weak growth and a dysfunctional tax authority have led to sharp revenue shortfalls, which have driven up the fiscal deficit. Combined with a weaker exchange rate, that is expected to drive the public debt ratio up to a peak of almost 60% - a level that Mboweni warned could pitch SA into the arms of the International Monetary Fund, with its harsh structural adjustment programmes. The tax decision makes macroeconomic sense, but raises the question of where the money will come from for new policy promises - National Health Insurance (NHI), for example, would require a 2-percentage-point increase in the VAT rate to fund.
The third decision was to maintain the overall expenditure ceiling, despite political pressure to breach it to boost growth. Ramaphosa promised his stimulus package would be within spending constraints, and the budget reallocated R32bn to more growth- and job-boosting areas. But critics across the political spectrum noted there was little in the budget to boost growth. Without higher growth and/or full-on fiscal austerity (we haven't had that yet, with government spending still growing in real terms), SA will keep digging itself further into a fiscal hole.
The way to get growth and better public services without spending more public money is to get the private sector to invest, and this is where Mboweni is much more forthright, and more controversial, than Ramaphosa. The president speaks of private-sector partnerships and participation. Mboweni says, in effect, get the private sector to do it and get the government out of the way. "Too often government is spending money on infrastructure when it could be better and more efficiently done by the private sector," he said. He suggested that getting a company like Discovery (though he didn't name it) to help fix public health care might be a better bet than spending public money on NHI. Mboweni clearly will say and do things that Ramaphosa cannot. SA's dire fiscal and growth outlooks mean the president will need him to, but will need to provide cover when he does.
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