Monday, October 27, 2014

Tell us the Truth , Minister Nene

Tell us the Truth, Minister Nene

On his return from the Inter-Parliamentary Union (IPU) conference in Geneva last week, a colleague told me this revealing story about South Africa’s delegation there:

Four senior ANC Members of Parliament at the conference made sure they squeezed every drop of benefit from the Ministerial Handbook. They opted for individual chauffeur-driven Mercedes Benzes to ferry them from their hotel to the conference venue and back.

A kombi was arranged for the other five South African delegates, although the two ANC members among them also chose to travel with their esteemed senior colleagues in the luxury German sedans.

Most of the delegates from Parliaments in the European Union used public transport or walked to get around.
This wasn’t lost on a British MP, who asked why his country should continue “foreign aid” transfers to South Africa when we clearly had more to splash around than anyone else.

In fact, one of the most embarrassing statistics arising out of the Nkandla scandal, is that the amount of taxpayers’ money lavished on the President’s private residence is almost equivalent in value to Britain’s annual Aid transfers to South Africa.

Nothing can explain away the waste and excess that has become synonymous with our government while our economy winds down, our unemployment rate soars, corruption escalates and state services deteriorate.

This was the context in which we sat down, on Wednesday afternoon last week, to listen to Finance Minister Nhlanhla Nene’s first Mini Budget speech – or Medium Term Budget Policy Statement (MTBPS), as it is formally known.

This is an important event, at which the Finance Minister projects how much revenue will be available for the following three years, what the implications are for state expenditure, and how he intends to “balance the books”.
It turned out to be the shortest MTBPS in recent memory – not only in duration, but in terms of information and ideas.
We were told that the growth forecast for this year had once again been revised downwards, to 1,4% (while other emerging market economies are projected to grow at 6.5%); that there would be a budget shortfall of R25-billion over the next two years; and that taxes will have to bring in an additional R15-billion a year.

But Minister Nene’s speech buried the true story in flabby “belt tightening” bluster.

The truth is the budget cuts will be far more severe than we are being told (reaching at least R50-billion over the three year period), and the tax hikes far more bruising. What’s more, there is currently little sign that the 3% growth rate on which the Minister’s projections are based, will be achieved.

Even if government Ministers stopped milking the Ministerial handbook, and President Zuma repaid his ill-gotten Nkandla gains, and halved the Presidential spousal budget, it will not be possible to cut R50-billion off government expenditure over three years without seriously affecting front-line services. This will inevitably hit the poor hardest.

So much for Minister Nene’s wonderful but empty sound-bite of not “balancing the budget on the backs of the poor”.
Where else is he going to find savings of R50-billion?

Instead of announcing measures to stop the mind-boggling extent of “fruitless and wasteful expenditure” (which totaled R22-billion in the 2012/13 financial year), Minister Nene announced a paltry R1.3 billion cut, taken largely from ludicrously high departmental catering and advertising budgets. These minimal “savings” do not begin to deal with the scale of the challenge.

Minister Nene should have told us the truth. South Africa’s economy is in the Intensive Care Unit.
To turn it around will take a huge amount of political will to cut fruitless and wasteful expenditure, punish corruption, and make bold policy decisions necessary to stimulate economic growth.
And herein lies our problem.
Why is it that, when austerity measures are announced in EU democracies, Members of Parliament catch the bus or walk, while their South African counterparts claim every entitlement they can squeeze out of their extravagant “ministerial handbook” (which was drawn up at a time when the economy was booming and SA had a budget surplus?).

The answer to this crucial question lies in one word: accountability. British MPs know that if they “live it up” on public money especially during times of austerity, the media will expose them, the voters will punish them, and they will join the ranks of the unemployed come the next election.

We still have some way to go to entrench the core value of accountability in our democracy, although we are making good progress in the right direction.

One example is the about-turn by the ANC’s Gauteng Region on E-Tolls. They got a blow to the solar plexus in May, when the DA’s Gauteng support grew by 40% in the 2014 election. They are, with good reason, terrified of the voters’ verdict in the local elections of 2016. This is how things should be in a democracy.

Although our constitution is steeped in the language of accountability, this concept does not mean much until politicians begin to fear the voters. And this only happens when elected representatives know that corruption, profligacy and power abuse will be punished at the polls, and leave them disgraced and unemployed.

In our democracy, Jacob Zuma regularly refers, with great satisfaction, to the overwhelming 62% victory the ANC achieved nationally in this year’s election. He has said (with contempt) that the Nkandla millions are only of concern to a small intellectual, newspaper-reading elite.

But he does fear his patronage network -- the interlocking web of cadres he has distributed throughout his bloated cabinet, his party, the private sector and the public service.

The deal is simple: he looks after them, so that they will look after him. The tragedy for our democracy is that, in President Zuma’s risk analysis, there is a greater threat to his position if he trims the luxuries of the political elite, than there is in the wrath of the voters if he fails to do so.

That goes some way to explaining why, as South Africa faces grueling budget cuts, the Presidency is brazenly pushing for a tripling of its own budget, during the medium term expenditure framework, from its current R366 million to R1 billion in 2017.
This involves creating 750 new posts to extend the crony network that will protect each other’s interests. No government that fears voters would dare to do such a thing at a time of economic crisis, when the economy is shrinking and thousands of hard-working people are losing their jobs.

The ballooning of the Presidency‘s budget is not the only thing Minister Nene omitted to mention.
The biggest elephant in the room, of course, is the proposed R1-trillion nuclear deal, (which we’re repeatedly told is not a done deal with the Russians - which no one believes for a second).

All indications (including secret meetings) point to the fact that President Zuma intends forging ahead with this ill-advised, unaffordable nuclear procurement, which will be the biggest chunk of capital investment in the history of our democracy.

And yet it got not one mention in the mini-budget speech. Minister Nene should have told us that this deal can only be funded through further massive increases in the cost of electricity, which will kill business, drive away investments and strangle households.

Expensive line items that did make it onto the speech were continued financial support for our dismally performing State Owned Enterprises, as well as promises to limit public sector wage increases to around inflation. He spoke about selling off “non-strategic” state assets, but made no mention of how he intends to stop the haemorrhaging of public funds through SAA, Eskom and the SABC.

To reflect serious intent to deal with excessive state expenditure, Minister Nene should have announced a commitment to:
• Meaningful measures to cut a bloated bureaucracy that has resulted in government spending rocketing to 45,9% of GDP
• Start by trimming our ludicrously large cabinet to a size that’s in line with other countries at a comparable level of development. The easiest way to begin would be by scrapping deputy Ministerial positions.
• Launch an efficient, meaningful intervention to cut corruption and waste, starting at the top. While Jacob Zuma continues to duck his corruption charges, the government’s declared “zero tolerance” for corruption has “zero credibility”.
• Say no to the nuclear energy deal. Instead, we should explore smaller, modular builds (including renewables) by independent power providers, that can be scaled up or down as the demand dictates.

• Give us the new Ministerial Handbook that we’ve been hearing about for ages. Nothing says, “I’m committed to saving” quite like an administration that practices what it preaches.

Of course, Minister Nene is not mandated to make any of these reforms, because that would seriously impede President Zuma’s well-established patronage network, which would cost Nene his job.

So instead, he makes a few meaningless cuts and hopes to make us pay to fix it all when he announces increases in taxes next year, which is likely to strangle the economy further.

The only solution is to grow our way out of this crisis, enable small businesses to flourish and create more jobs, and build a broader tax base because more people have real jobs.

The government must create the context for this through bold leadership and sensible economic policy choices. Anything that discourages growth and jobs, hurts the poor more than anyone else.

The question is: when will voters deal with a President that refuses to lead?

Further tax hikes next year, including a possible increase in VAT, along with the prospect of crippling electricity bills, could have the same effect as e-tolls, but this time for all South Africans not just for the people of Gauteng.
The realisation amongst voters that President Zuma has been using them for a free ride to build his own empire, cannot come a moment too soon.

We know that 2016 is just around the corner, but far enough away for South Africans to find out by then what Minister Nene didn't tell them in his speech last Wednesday.

Helen Zille

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