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Africa Brief                                                                             23 April 2017

Finance Ministers on barricades      23/4

by Cees Bruggemans                    words 720

There remain many who keep mourning the departure of Gordhan, and who have the deepest misgivings about Gigaba. What is it that creates anxiety?

Gordhan surrounded himself with good people who believed in conventional fiscal policy, trying to limit deficits and dubious spending, and arranging the tax burden so that it might do least damage to the economy, in all instances looking out for the poor in society so that they with fewest means might be burdened least.

Gordhan could, however, be disturbed into a raging oracle of indignation by the most innocent question(ing), always having the iniquities of the past front and centre and determined to address them. The revolutionary credentials of Gordhan were all there, even if it didn't keep him from good management of the country’s finances.

What stood out, at least to this outsider, was his distaste, indeed condemnation, of corruption. Indeed, his idealism on all fronts was well advertised.

With Gigaba’s entrée, most noticeable was that too many good people in the existing Treasury team left in a hurry, or were made to go. In their place came people of as yet untested means, while some advisers were known for their extremely unconventional ideas.

As Ministers are appointed for their political oversight, not their technical substance, the teams they gather send out a strong signal about the direction of policy likely to materialise.

What worried many observers was the close association between the new minister and the president, and elements within that circle.

Gigaba seemed to have a dual mandate. To maintain a sound financial policy, while possibly more easy going regarding favoured political projects, certainly more so than his predecessor had been.

The problem with such mandates is that the audience which matters most doesn't necessarily buy into them. You may be a raging revolutionary on the inside, as Gordhan still is, but it matters whether you recognise right from wrong and are prepared to be conventional about your policy intentions.

Gordhan passed that test with honours, among his domestic and global audiences where it mattered most – those deciding our credit rating and whether to provide us with the capital which we ourselves apparently couldn't generate.

Gigaba hasn't as yet sat that exam. Instead, there is intense scrutiny of those he surrounds himself with, with whom he associates and ultimately what he does.

Here what matters most is not what you say but what you do.

Gigaba apparently tries hard to say the right things, even if at times not quite succeeding. The messaging at the time of the credit downgrading to junk could perhaps have been better?

Other than that, saying the budget deficit will be reduced may say less about good husbanding than as yet hidden intentions to milk the tax cow, remaining kind to the poor but becoming far more severe with those who have something to share. It is an understandable hunger, but not one that will get you very far.

Yet like Gordhan before him, Gigaba expresses an intense belief that growth will revive (partly solving his revenue shortfall challenges) and that all will be well. Even so, we have yet to hear any Gigaba blueprints as to how such growth is to be achieved. If fully in line with the President’s thinking about revolutionary changes, that would explain why he was chosen, but it is not a sure-fire way of getting a market economy to start firing on all pistons again.

Thinking one can have it both ways, smooth-talking and glad handling his financial and business audiences while sticking to the cabinet plans about how to change things, may simply run into a deep resistance.

Taxing an unwilling public in support of unpopular policies has its shortcomings, while simply trying to borrow more will quickly run into market quagmires. This doesn't mean they won't try.

You don't swap a good finance minister for another. More likely, it is malleability that is the aim. The President clearly thinks this will work. But where are the real flaws in this, Gigaba merely being his tool?

Or will Gigaba just be the latest in by now a surprisingly long line of presidential appointments to suddenly decide to only do the right things? The first test (the people he surrounds himself with) isn't very promising. The real test lies ahead in the coming twelve months and beyond.

 

Cees Bruggemans                                                                          

Bruggemans & Associates, Consulting Economists

 

Website www.bruggemans.co.za

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