On the Brink. Claire Bisseker
management continuity at the Treasury. He praised the ‘skilled and experienced team’ he had found there, and lauded it as ‘a strong, professional and stable institution’.42
‘Our top priority is to achieve inclusive growth,’ he said. ‘All of our national challenges will be easier to deal with if our economy is growing, even as we remain aware that growth is not automatically inclusive. Nonetheless, we would rather debate how best to share a growing pie than a shrinking one,’ he added, using the language of a Treasury insider.43
At least Gigaba had proved to be a quick learner. His comment about ‘wild gunmen running amok’ had clearly been a little too close to the bone. For his first five weeks in the finance minister’s chair, Gigaba had the benefit of the wise counsel of Lungisa Fuzile, the former director-general who had served finance ministers all the way back to Trevor Manuel.
Fuzile’s impressions of Gigaba are encouraging. Over a pot of masala tea served in a black cast-iron teapot in Cape Town’s Taj Hotel, a short walk from the Treasury’s parliamentary offices, Fuzile recalled Gigaba’s first day on the job.
‘Only hours after he was appointed, I met him and his deputy, Sfiso Buthelezi, and presented him with the S&P report. I told him both Moody’s and Fitch were readying themselves to pronounce on South Africa’s ratings.
‘They said, “What do you advise us to do?”
‘I said that they should talk to them.
‘They said, “What do you advise us to say?”’
Fuzile explained how the rating agencies would be likely to seek reassurance that, as the new minister, he would stick to the Treasury’s promise that the nuclear deal would ‘proceed only at a pace and a scale the country could afford’, nor would he allow SOEs’ debt to explode.
‘Lo and behold, a few hours later we were speaking to the rating agencies and the two of them, particularly the minister, did all the talking.’
Fuzile was impressed by Gigaba’s quick grasp of the issues. This was cemented a few weeks later at the IMF spring meetings in Washington and on an international roadshow to New York and Boston, where he felt that Gigaba and Buthelezi had held their own in the rarefied world of high finance.
‘He strikes me as being incredibly smart,’ said Fuzile. ‘There is no reason on the basis of my interaction with them to question their intentions or their ability to grow into the role and to cut it in the end. Time will tell.’
Reading straight from Fuzile’s playbook, Gigaba promised investors that he would act decisively to improve the governance and financial sustainability of SOEs, would stick to the medium-term fiscal-consolidation plan put in place by Gordhan, and any procurement of nuclear energy would follow the necessary legal prescripts and ‘proceed at a pace and scale the country could afford’.44 He also invoked the NDP as the core of South Africa’s long-term development vision and, according to Fuzile, this was genuine.
Even highly sceptical investment bankers warmed to Gigaba once they had sat down with him. Though not all were convinced, several were impressed by how quickly he had absorbed the detail of his portfolio and was taking proactive steps to safeguard the fiscus. He seemed to be doing far more than mouthing platitudes from a prepared script.
Gigaba’s promises of sticking to Gordhan’s fiscal-consolidation path were very reassuring, but they were almost certainly going to prove impossible for him to honour. For even if he was able to keep to the expenditure ceiling, net government debt would probably refuse to stabilise at 50% of GDP over the coming three years, as promised, unless, by some miracle, growth recovered.
There was just no getting away from the fact that the Treasury’s fiscal plan hinged on the assumption that growth would recover sustainably to 2% by 2018 and then keep climbing – a hope that Zuma’s cabinet reshuffle and the ensuing recession had shattered conclusively.
In fact, it had been clear for some years that South Africa’s long-term fiscal trajectory wasn’t going to be sustainable – even under Gordhan – without further adjustments. Under Gigaba, it all looked hopeless. But it was doubtful in those early days whether Gigaba himself realised that while his instructions from Zuma might have been to say whatever was necessary to avoid an economic meltdown, he would be powerless to prevent it – even with the shiny new wings of finance minister pinned to his epaulettes.45
It seemed inevitable that Zuma and his new cabinet of novices and useful idiots were going to break what little was left of the South African economy.
Fuzile put the odds of Gigaba managing to pull a rabbit out of his fiscal hat at about 50:50. But, amazingly, this wasn’t because Fuzile was worried about Gigaba going on a populist spending spree. Rather, he was worried that Gigaba might tighten conditions too much too fast in an effort to prove himself truly independent of Zuma and the Guptas, and worthy of the title of finance minister. Zuma, in his desire to prove he wasn’t leading South Africa to perdition, might even go along with him. It would certainly be a huge upside surprise if Gigaba ended up pursuing fiscal policy more conservatively than Gordhan had.
There was even an outside chance that Gigaba, by virtue of possessing greater political capital and having Zuma’s trust, might manage to pull the rest of the government along with him. If so, he might be able to accelerate the pace of structural reform and raise the growth rate. Could Gigaba perhaps succeed where Gordhan had failed?
Was it possible that Gigaba might ‘do a Mogoeng Mogoeng’46 on Zuma and rise to the occasion demanded by such a senior portfolio? Surely Gigaba must have realised that this was an incredible opportunity to make his mark on the country and that, if he handled it correctly, he might even become president himself one day.
During Gigaba’s first few weeks on the job, this optimistic view began to gain currency. And then, in May, the cache of Gupta emails hit the press. One of the first cabinet ministers to be implicated was Gigaba for having made a board appointment at Transnet that appeared designed to facilitate the Guptas’ access to R5,3 billion in kickbacks on the SOE’s R50 billion locomotive-procurement deal, among other things.
It subsequently emerged that Gigaba had appointed a whole host of directors with Gupta links to the boards of Transnet, Eskom and Denel. ‘The door to special favours for the Guptas seems to have been opened from the moment Gigaba was appointed Public Enterprises minister in November 2010 and continued through to his move to the Department of Home Affairs in 2014,’ concluded a Business Day investigation.47
But even if Gigaba hadn’t been implicated, it seemed highly improbable that he would succeed in meeting the rating agencies’ dual requirements of enforcing fiscal discipline and raising the growth rate. Not even Gordhan had managed to do the latter – and this was before the economy had been saddled with the burden of a junk rating.
The problem was that following five years of slowing growth and mounting debt, everything had come to depend on South Africa’s ability to raise the growth rate. Given the downgrades, and all that these implied in terms of weaker public finances, lower confidence and depressed investment, the country faced the prospect of bumping along the bottom with growth rates of around 1% for several more years.
In this environment, South Africa can expect investment and employment growth to contract, per capita GDP to shrink, and social expectations to remain unmet. Certainly, any socio-economic transformation that is likely to occur is bound to be very far from the mass economic emancipation that Zuma had promised.
And if Zuma’s new troops respond to these pressures with further policy bungling and by ratcheting up their anti-white, populist rhetoric in the same way they laid into the rating agencies for daring to downgrade South Africa, it will only cement South Africa’s downward slide.
‘It is now in the hands of civil society and our political leaders to pull South Africa decisively away from a situation that, if allowed to go unchecked, could potentially turn into a full-blown economic, political and social disaster,’ warned Le Roux.48
The muddling-through, loop-en-val49 option of economic stagnation was beginning to look quite palatable next to this looming