editorial….July 13 2020…
Parliament recently saw a drama being played out that was reminiscent of the old and famous movie where, after a long number of small confrontations, the two parties shoot it out in Main Street. With the critical matter of the approval of South Africa’s economic direction at stake, shooting straight was not really the issue but who pulled the trigger the fastest.
The movie set for the shootout occurred before the Finance Standing Committee under chair Yunus Carrim on 7 July. The stage was the public sector hearings debate on Minister Tito Mboweni’s Supplementary Budget, and this was before the house for adoption in conjunction with consideration of the report from the Financial and Fiscal Commission (FFC), the independent entity that represents government opinion.
Amongst the twelve or so public submissions, including those from South African Institute of Chartered Accountants; Organisation Undoing Tax Abuse (OUTA); COSATU; and the C19 People’s Coalition; was a new group, the Economists Initiative (EI), who had been on e-NCA the night before with spokesperson Neil Coleman of the Institute for Economic Justice and COSATU fame speaking on their behalf.
Neil Coleman claimed his group represented 122 economists and policy experts. How fast this grouping had been cobbled together, we do not know. Coleman (brother of well-known Colin Coleman, businessman and also COSATU veteran) said in his interview at the time his group were going to reject the Budget in its entirety and ask Parliament to do the same. Should Parliament fail to do this, he said, an approach to the Constitutional Court would be considered. Most pricked up their ears at this and plugged in to the virtual debate following.
The shootout between EI and Treasury did eventually take place and most dramatically at that, the chosen venue being a Finance Standing Committee meeting on 7 July. EI’s primary complaint was a repeat of what had been said before, in that in their view the Tito Mboweni austerity Budget had “completely betrayed the President’s R500bn Covid 19 rescue package”. They told MPs that they strenuously opposed the extensive austerity package to be introduced over the next two to three years since it involved cuts of more than R400bn.
Joined by the Budget Justice Coalition (BJC – a coalition of civil society formations), both were the primary critics of the Budget and most vociferous on the subject, EI maintaining that National Treasury were “misleading the country by suggesting that the only route government had in financing the expenditure and the shortfalls arising from the economic crisis, was to borrow on international markets or from financial institutions internationally.” This was totally untrue, they maintained.
BJC suggested that the Budget was “so regressive that it was probably unconstitutional”, EI stating that the Budget was “tantamount to committing economic suicide”. As intimated on TV, they took the extraordinary step of calling for Parliament to reject the Budget and send it back for revision based on fresh ideas.
National Treasury’s response to the attacks was overwhelming in its anger, particularly towards the EI. Treasury DG, Dondo Mogajane, begged MPs not to be “deceived and misled” by such submissions, or for Parliament to be used as a “platform for false, misleading statements”. Importantly, DG Mogajane attacked the BJC and Economists Initiative inputs as being “politically motivated”.
There it was, a clear statement by Treasury that political interference was at the heart of the EI submission.
In the open
Immediately the chair of the Committee, Yunus Carrim, intervened and reprimanded DG Mogajane severely for first dictating to his committee what they should or should not believe; secondly, for insulting members of a public sector submission invited to Parliament; then for advising Parliament how it should respond to a submission, and in particular, for calling EI’s input “false, alarmist and misleading”. Yunus Carrim as chair said this was all outrageous and insulting.
Carrim noted, “The DG is normally a mild-mannered man” and said that he could not understand the DG’s “change of character”. Carrim then insinuated quite clearly that perhaps Minister Mboweni had put the DG up to this. This was a most unpleasant exchange. The Treasury team denied strenuously that they had been told to say anything.
Carrim must have been perfectly aware of what was really going on and that MPs were being asked to go above the Finance Committee by EI and appeal to President Ramaphosa, but he still chose to lambaste Treasury representatives.
So, let’s look at the reason why our respected, experienced and usually quiet DG Mogajane uncharacteristically exploded.
The gun battle between National Treasury and the extreme left-aligned followers in the governing party alliance, such as COSATU, SACP and a number of ANC followers, has been going on for almost a year. Maybe it was started some time ago with comments from Ace Magashule on nationalising the Reserve Bank, then followed by the quantified easing or QE issue and the possibility of using PIC benefit funds. Perhaps even the issue spoken of in hushed tones, the printing of money.
To this grouping of opinion, strict debt control and Budget cutting on social projects hurts the “poorest of the poor” in a disproportionate manner as compared to the wealthy and middle-class sector, not necessarily where the power base of the governing party lies. This theme of thinking has been expressed many times by a multitude of observers.
No, no issues
On the other hand, Minister Mboweni and National Treasury, hating debt in any form especially crippling long-term debt, intend to curtail any proposal to accumulate vast quantities of debt. This might be an over-simplification of policy calls but the suggestion in Parliament clearly came from the EI, as was forewarned, that the Budget should be re-written, or at least “revised”, representing a call to battle between the two ideologies.
For National Treasury it was the final insult and boiled down to a suggestion that Treasury should be constitutionally arraigned. Another low level had been reached in the intercine war being conducted between the two schools of thought within the governing party. President Ramaphosa as always and characteristically said nothing.
After this altercation, EI then laid out before parliamentarians how the Budget had departed from the R500bn package promised. The most important commitment to COSATU, EI said, was the implementation of the R100bn job creation promise but now, they said, just a mere 6% of this allocation was left.
Furthermore, Treasury in their view had gone back on the President’s promises had made cuts of more than R400bn, most of them they said affecting social delivery.
Arrived in Parliament
This rift in the governing party at the expense of national objectives is becoming more evident daily. For one party to the argument, the problem appears to be that the economy, spiraling downwards, is seen as becoming debt endemic which could well result in bankruptcy, no possibility of growth and therefore coupled into a scenario of endless poverty.
For the other party, the problem appears to be the view that the poor will not only continue to be poor, but that poverty will worsen unless further debt is risked by spending more into growth and spending to get out of debt.
Cul de sac
The legislation for the Supplementary Budget, the subject of the confrontation contains two Bills as with any budget, both of which are section 77 Money Bills in terms of the Money Bills Act. This means that Parliament is allowed to comment upon the Bill in terms of the Constitution but not alter it in way, using a majority vote or not, unless so agreed by National Treasury.
The Constitution insists on this, in order to protect its people from interference in any Budget by any political party on an ideological basis or with motives not based on fiscal reasoning.
Particularly sensitive would therefore be any changes made subversively to the Division of Revenue Bill, the mechanism which breaks up the Budget and specifically passes the sums of money to the appropriate National Departments and to local government via the nine provinces. The reference to “political interference” is therefore the cause of the National Treasury’s discomfort and what altered the mindset of the mild-mannered DG Mogajane.
The person paid to make the final decision between the two choices is Minister of Finance Mboweni, and when he tabled the Division of Revenue Amendment Bill No 9 and the Adjustments Appropriation Bill No 10 said clearly in his speech on 24 June to Parliament that debt must be controlled. To change that, EI must go to the courts. So far nothing has happened.
Minister Mboweni summarised the details of his approach to the problem in his speech by stating that the “herculean task” for Treasury was to put measures in place to grow the economy but at the same time close the “hippopotamus mouth of burdening interest and loans”, i.e. the enormous sums required to repay debt in the future “in order to avoid a sovereign debt crisis”.
One man standing
Such a spectre could haunt any incumbent Minister of Finance, that of being considered as a bankrupt nation and a financial pariah, as was Greece, and dealt accordingly by creditor nations and international lenders.
Always we shall be distracted by the latest in Covid 19 regulations and the frightful pandemic engulfing our country but, in the background, this gun battle will continue within the governing party and, unfortunately, will play out in Parliament further.