There could be a significant “reconfiguration” of National Treasury in the weeks and months to come, if new finance minister Tito Mboweni gets his way.
Mboweni was in fine form during a press conference prior to announcing his medium-term budget policy statement (MTBPS) in parliament on Wednesday, promising more decisive action to fix government problems and more partnerships with the private sector to increase investment and improve service delivery.
Barely three weeks on the job, it was clear that Mboweni is still adapting to a new political life, even proclaiming that despite being the Minister of Labour many years ago, he is “still battling to get use to government protocol”.
It therefore remains to be seen whether he will be able to walk his fighting talk to fix South Africa or whether he will be reined in by the political infighting in the ANC and the other alliance partners.
However, his fighting talk is exactly what is needed. As the very first sentence in Chapter 1 of the MTBPS states: “South Africa find itself at a crossroads”.
The document then proceeds to paint a grim and dire picture of state finances, which will become even worse in the years to come.
The most notable example is the prospect of South African debt. In the 2018 budget – published only eight months ago – the ratio of debt to GDP was expected to hit a peak of 56.2% in 2021/22. The new MTBPS projection is even higher at 59.6% in 2023/24 after which it will remain at around 59% for the next few years.
This is as close as damn it to the 60% mark, which is seen as a significant danger zone by rating agencies. (I am willing to wager a fine bottle of wine that we will hit this mark prior to 2022.)
This rising government debt also affects government’s interest payments, which is set to increase to 15% of total expenditure by 2022. (This would mean that between the total wage bill and interest payments, government will use more than 50% of its total budget to pay interest and its employees.)
But it was evident that Mboweni wants to tackle problems decisively. He used an example of how he has already roped in the army to tackle the pollution problem in the Vaal River system.
“If you live in Gauteng you cannot drink tap water as it is polluted. We need to deal with this problem decisively,” he said.
He added that an inter-ministerial committee would not achieve this.
In his prepared speech, Mboweni added: “We are dealing decisively and urgently with the water crisis in the Vaal River System… I have asked the president and the Minister of Defence for the military to assist with engineering and other expertise to resolve the crisis in the Vaal River system. I am happy to report that approval has been granted. The generals in charge have already started working on solutions.”
Mboweni used the word “partnerships” on numerous occasions, referring to a closer working relationship with the private sector to increase investment and improve service delivery.
He referred to the N3 and N4 highways as examples where the private sector not only built the infrastructure, but are also the operators. “For these projects to operate efficiently, we have service level agreements in place with our private sector partners. These kinds of partnerships will be accelerated.”
He also referred to the tomato producer ZZ2 in answering a question on land reform. “We need to partner with them as they know how to grow tomatoes. Rather than take their land, which will be the worst outcome, we need to allow them to help us.”
In reference to the dire state of state-owned enterprises, Mboweni said government should be “open minded” to equity partnerships and to the notion to close some state-owned businesses that are not performing.
“The Swiss closed Swiss Air and the launch of Swiss International shows it can work. We need to be open-minded to such options,” he said.
He added that such partnerships can play a significant role to improve efficiencies at Eskom. “Such partnerships are possible and the private sector will help if asked. We need to look at these options and this must result in actions to which the market will react.”
Infrastructure development and increased investment were also key themes. Total public infrastructure expenditure will amount to R855 billion over the next three years, of which only R370 billion will be from SOEs.
Mboweni belaboured the point that private sector involvement will be pivotal, not only for investments of their own, but also to ensure public projects are executed efficiently.
Can Mboweni survive politics?
The question now is whether Mboweni, after being in the Treasury hot seat for less than a month, has the authority to implement the changes he proposes.
We have seen several Ministers of Finance in recent years making promises of implementing urgent reforms, most of which did not materialise.
Mboweni clearly has the support of President Cyril Ramaphosa, as is indicated by the roping in of the army to deal with the pollution crisis in the Vaal. It also remains to be seen whether Ramaphosa has the political authority to back Mboweni all the way.
Mboweni will also face significant resistance within the various factions in and partners of the ANC alliance, where the private sector is often seen as an exploitative stakeholder in the economy.
He is also not going to make friends in Ramaphosa’s extended cabinet, especially not after stating in the press conference that if asked by the president for his opinion, he would advise that the cabinet should be reduced from more than 70 ministers and deputy ministers, to fewer than 25.
Hopefully Mboweni is not “corrupted” by party politics. His decisive approach is critically needed to pull our economy back from the precipice.
Read the complete MTBPS here.