Economic Thoughts: Super Salesman Pravin Gordhan

There are genuine rewards & recognitions, and then there are hospital passes. What happened to Pravin Gordhan last Sunday was a bit of both when Zuma re-offered him (as a pair of ultimate safe hands capable of damage control) the position of Finance Minister so very recently vacated by his new colleague David van Rooyen, who in turn was offered the position of minister of local government (for which he likewise wasn’t really qualified, continuing his quandary, definitely not of his making).


Having gamely accepted, with ground rules we can only surmise, but probably quite different from what was ever offered before, possibly insisted upon by senior ANC cadres, Gordhan faces the unenviable task of having to face the media with a straight face and insist things would be done in ways that clearly had been flaunted up till then.


Strangely, one did not feel like singing “how the hell can we believe you?”, waiting for Pinocchio’s nose to grow & grow as he explained himself ever so charmingly & disarmingly, though with steel showing.


The country won’t spent what it can’t afford or with resources it can’t raise. Growth will need to generate the resources to be used, alternatively raised through higher taxes. Higher borrowing specifically is not an option as debt stabilisation & retention of the investment credit rating are hallowed ground?


This doesn’t preclude adventuresomeness, considering the option of raising taxes, but somehow one senses that appetite to be subdued. Still, it remains to be seen what government appetite remains, given challenging cycles of political elections ahead in which the populist left in particular will be promising the moon & somebody else’s body parts to make itself more attractive, and bearing in mind extensive dishing out of food parcels may become handy in time of severe drought.


Still, the main emphasis appears to be on disciplined clean government, trying to restore trashed reputations, given past presidential antics. Not really mission impossible, but to be given shape in the February 2016 Budget.


To restore confidence politically among citizenry, financially among markets and economically among business, the best foot forward would be to rigorously pursue the spending ceiling while not unduly raising the tax burden as the budget deficit and government debt are steadily stabilised as projected by Nene.


Equally important would be evidence of giving short shift to inopportune exploiters of the public purse residing throughout the public sector in politically privileged positions, starting with SAA and its vaunted Airbus contracts worth billions and allegedly the reason why Nene had to fall.


Figleafs were offered up early re nuclear ambitions (and the national health insurance scheme), but with full clarity yet to be obtained. Nuclear may remain an option, or is it merely an obfuscation now? This in contrast to the national health scheme, except its ambitions may remain phased as long speculated, a matter of affordability & growth rather than simply ruinously raising our tax burdens.


The real thrust appears to be re-establishing a gilded reputation for sound finances worthy of an investment grading (doable despite slow growth), offer hope to business longer term and getting them to restart confidence & growth engines (possibly more a function of Zuma lame duck status and future reform & leadership yet to be clarified) and cleaning out more thoroughly the corrupt public sector stables, achieving proof of clean government rather than offering more corrupt feeding troughs for the well-connected.


A challenging task, but not a thankless one, something that presumably can be achieved now that ground rules have been more clearly established, and markets, business, civil society, the populist left & global rating agencies have shown they are capable of plug pulling and seeing them all on their way.


A remarkable week in politics has come to a close, the summer break beckons, and the proof will be in the 2016 pudding. How will it shape local elections?