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It was only 30 seconds long, but it marked the seminal moment of this year’s budget speech. An hour and 18 minutes into this speech, Finance Minister Pravin Gordhan approached the end of a hard slog presenting the national revenue and spending plan.
He thanked his team. And then he thanked his predecessor, Nhlanhla Nene. And then Parliament’s National Assembly clapped for a solid 30 seconds. On. And on. And on.
The opposition benches joined the ANC benches, who started hesitantly at first, but then joined to honour the work of the studious finance minister who was so unceremoniously axed in December.
The man who had chopped him, President Jacob Zuma, sat hunched over, eyes lowered. He did not clap. Politicians and officials say the round of ringing applause was as much a moment to honour Nene as it was a signal to Zuma that the House, including his own benches, did not approve of what had happened.
That moment sets up a conundrum for the men and women who slogged night and day to rescue the economy. First, some background.
The date of Nene’s axing, 9/12, as they call it, was a slap in the face to South Africa’s crack team from the finance department, Treasury and the SA Revenue Service. It felt, said one, like a “coup”. Another called it “an attack”.
If the imposed incumbent, Des van Rooyen, had not been made to quit four days after being appointed, these officials would probably all have been gone by now.
Highly skilled, proud of what they do and quite nerdish in their attention to detail, this is a civil service elite made up of brain-box former activists.
They could work anywhere. This team worked from December, when Gordhan returned, to put together an unprecedented programme of shuttle diplomacy with business, civil society and trade unions to create a united front.
And this work informed the budget. On Wednesday, it was unveiled by four clever bald men in dark suits: Gordhan, Treasury director-general Lungisa Fuzile, Deputy Finance Minister Mcebisi Jonas and Reserve Bank governor Lesetja Kganyago.
We live at such a furious political pace that the impact of their work is not sufficiently detailed: look carefully, and it is akin to the best goal save you have ever witnessed.
The markets may not have liked the budget, punishing it with a whack to the rand and the stock exchange, which lost ground, but it remains a feat. The thumbs down was that growth has been revised downwards to 0.9% and there’s a higher than usual budget deficit. In addition, extraneous factors affected it. Brazil was downgraded to junk status on Wednesday, and we live in the same emerging market basket.
Still, the budget is remarkable for being neither the paean to austerity that some had predicted nor did Gordhan take the easy route of turning himself into a Robin Hood, as he could so easily have done to claim a simple fiscal win.
Market commentators on Thursday posted the unusual critique that taxes on the wealthy and business had not gone up. Neither did value-added tax rise as social justice campaigners had feared, while the grant purse, now paid to 16.4 million South Africans, will grow at the rate of inflation. Higher education and, specifically, the National Student Financial Aid Scheme led by Sizwe Nxasana, is getting a fat injection for support to stave off growing campus resistance.
The savings are being made through a hiring freeze where expensive posts will have to be justified – Business Day reported that a headcount decline of about 20 000 is expected because of this. It is minimal pain on a civil service staff complement of 1.2 million. Gordhan predicts the budget deficit will narrow from 3.9% this year to 2.4% over the medium term.
But the eagerly anticipated budget got no lap of honour. Afterwards, I asked many people why. The adjective I heard most often was that it was a “missed opportunity”; others described it as “thin on detail”; a banker who had been in on the most urgent talks to save South Africa from the doldrums was said to be so angry he couldn’t speak. Why? The budget had not been “bold”. What were they looking for?
This is where we go back to the man hunched in his seat, smouldering, as Parliament stood to honour Nene.
Gordhan went as far as he could without Zuma’s explicit support on more defined action.
I’m sure, for example, that Gordhan would have liked to announce a new board for SAA on Wednesday as a symbol of intent on struggling state-owned companies so in the red that government is guaranteed to be up to its eyeballs in their debts. But Gordhan’s hands are tied because two airline directors also sit on the advisory board of the Jacob G Zuma Foundation, the president’s charity, and are very close to him.
The finance minister would also have liked, by now, to have waved goodbye to tax commissioner Tom Moyane, with whom he is engaged in a low-attrition war.
On Thursday, reports said the Hawks wanted to question Gordhan on a file the commissioner developed on an alleged rogue spy unit at the revenue service. This saga is bad for revenue collection, which is down – but not so badly that it cannot be restored. But the finance minister is checkmated because Moyane is a presidential appointee. Zuma is also in too weak a political position to push through the much deeper reform of the public service that is now necessary.
Knowing our president, he would have experienced the sustained applause for Nene from his own benches as an act of disloyalty that made him angry and nervous.
By the next morning, the ANC caucus was already being grilled on its loyalty, especially as MPs were voluble about the U-turns on the Nkandla defence in the Constitutional Court that they had found out about in live television broadcasts of the hearing into whether the president should pay back some of the public money spent on renovations to his estate, and on whether he had violated his oath of office.
On Monday, the president’s anger at the events following 9/12 were made visible when he told the newly minted members of the Presidential Press Corps that Van Rooyen had been the most qualified of the three finance ministers he has appointed.
I had thought this an off-the-cuff and ill-considered remark ahead of the budget, made to assuage Van Rooyen, who has been turfed about rather awfully – but people with a keen knowledge of Zuma’s style say that this was a smackdown of those who had vetoed the president’s actions in Treasury in making Van Rooyen’s appointment – he does not like what has happened.
It was as much a message as that round of applause nearing the 80th minute of the tabling of one of South Africa’s toughest post-apartheid budgets.
While a gargantuan effort had gone into creating an image of national unity and the existence of a social compact at this defining moment, what we also saw play out publicly for the first time this week was a low-intensity war.
What’s going on here? There was a spy unit at the SA Revenue Service (Sars), but it was not rogue – most revenue services have intelligence-gathering capacity because of the scale, sophistication and effect of tax dodging on their fiscal positions. It was comprised in terms of law and signed off by an earlier finance minister, Trevor Manuel.
The unit largely went after huge underworld money stashes such as those found in cigarette-smuggling empires (big business because government has hiked sin taxes so ruthlessly) and it went for mega tax dodgers like Dave King. But then it touched politics and hit a political nerve – skirting too close to the empires of cronies who are in presidential circles. It’s no secret that the president is vulnerable to capture.
This is why the acting commissioner, Ivan Pillay, was pushed out of Sars and replaced by Tom Moyane, say several officials.
Cronies engage in the practice now called “state capture” in South Africa. It refers to big money being used to buy political support for everything from customs duty evasion to policy capture (nuclear policy is widely regarded as being made for interests outside the state). The term is used as a synonym for the business practices of the powerful Gupta family that leverages political support into business growth with significant acumen. But it is much bigger than the Indian émigré family.
The budget’s emphasis on parastatal reform is a response to this capture because the large budgets commanded by Eskom, Transnet, SAA and Denel, among other state-owned companies, are regarded as being soft targets for capture.
The Guptas, for example, operate at three of these while Dudu Myeni and Yakhe Kwinana, directors of both SAA and the Jacob Zuma Foundation, have SAA cornered. There are others. In the months ahead, the skirmishes we saw during the tabling of Budget 2016 are likely to play out around Sars and the state-owned enterprises.
I predict much soap opera and drama. – Ferial Haffajee
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