RAMAPHOSA ANNOUNCES SMALLER CABINET

Publication Date: 30/05/2019

The announcement of a smaller cabinet and performance agreements for the new ministers is an important commitment by President Cyril Ramaphosa to a much needed streamlined, efficient and accountable public service. Once signed, the performance agreements should be made public so that all South Africans are able to hold ministers to account for their efforts in promoting the economic and social development of South Africa.

However, signals and symbols are not enough. While reducing the size of a bloated national cabinet was necessary, government must move decisively to contain and reduce the public sector wage bill and the wasteful, unauthorised and unnecessary spending, which threatens the country’s fiscal stability. Despite the reduction in the number of ministries, the size of the executive, including deputy ministers, remains unreasonably high, with many who failed to distinguish themselves over the last ten years.  We are heartened by the president’s commitment to the structure and size of the state being guided by the need to build a modern, developmental state and the efficient use of public resources.

The reappointment of Tito Mboweni as finance minister is an important signal to the market that this government is committed to responsible economic and fiscal policies. We hope Minister Mboweni will give rebuilding capacity in the National Treasury and restoring confidence in public finances his serious attention. Restoring the credibility of the National Treasury in the eyes of the investment community and other government departments will require much more ‘hands-on’ engagement by the minster.

Deputy Minister Masondo will have to work hard to win the trust and confidence of all South Africans in his ability to handle the public purse. It may well fall to him to sort out the corporate governance failures at the Public Investment Corporation (PIC), which manages the retirement savings of public servants.

The finance minister and his deputy will also have to immediately start the hard work of drawing up a national budget for the new administration, which is fiscally responsible and provides for South Africa’s most vulnerable people. This will require some hard policy choices about pet projects and politically protected enterprises, among others.

Public Enterprises minister, Pravin Gordhan, is again charged with dealing with the single greatest threat to the South African economy – the financial and operational crisis at the power company, Eskom. While much hope has been pinned on him, little real progress has been made in resolving the challenges in his tenure so far. Even now, the company is again without a chief executive officer. While significant steps have been take to improve governance at Eskom, there is no time left for patience and studying and understanding the problems at Eskom, when much of this work has already been done, and every day increases the company’s debt burden and operational inefficiencies.

Banks have long made it clear that they are willing to support – with skills and resources – those public enterprises for which there is a sustainable business case. Telkom is a sterling example of the contribution the private sector can make to turning around ailing state-owned enterprises. However, banks cannot be expected to risk the money of their customers on unsustainable companies to which the state is ideologically committed. The minister must show the same resolve he is showing in the fight against state capture, in clearing the way for a real, sustainable and accountable partnership with the private sector in dealing with the crisis in state-owned enterprises.

We would like to emphasise to Minister Ebrahim Patel that the function of the Department of Trade and Industry is to facilitate the growth of business and investment. Too often the instinct of government when dealing with the unintended social and economic consequences of ill-considered legislation and poor policy enforcement, is to pile on more regulation and increase policy uncertainty – at great cost to business and consumer confidence, job creation and investment. Policy uncertainty in a myriad of guises – from political rhetoric to ill-considered legislation and regulation – remains one of the greatest barriers to investment in South Africa.

Obstacles to investment and structural reforms – of the labour market, small business regulation, work visa regimes, among others – must be tackled without ideological affiliations. All legislation must be subject to evidence-based social and economic impact assessments and public consultation – to limit the harm of ill-considered policies. South Africa must focus on restoring its investment ratings and securing sustainable, faster inclusive economic growth.

BASA is concerned about the president’s stated determination to accommodate a number of former ministers who did not make it back to his cabinet, many of whom have been implicated in state capture. We respect the decision of the President but urge him to make a clear and decisive break with the “lost years”. This includes expediting processes to charge and prosecute those responsible, for corruption and maladministration in both the public and private sectors.

The new cabinet meets the minimum requirements for a country that is dealing with the effects of state capture and an economic and fiscal crisis. However, while it accommodates diverse political and ideological factions, the cabinet must unite behind a common vision and strategy for inclusive economic growth. The president will have to lead from the front, to ensure that his cabinet produces – and implements – coherent and practical economic policies and puts the interests of the country and its people first. Public relations and accommodating factions cannot replace vision and political will.

Financial institutions in general, and banks in particular, serve a unique function in our economy. They hold in trust the savings of workers, professionals and businesses, and invest it in the infrastructure and development projects necessary for inclusive economic growth.

BASA has repeatedly said that South Africa needs leaders of integrity, who can honestly set out the seriousness of our economic crises and the difficult trade-offs that must be made between what we can afford now and what we want in the future.

Such leaders will find the South African banks are willing and committed partners in the struggle against unemployment, poverty and inequality.