Time to pay for State Capture

Minister of Finance Tito Mboweni likes to tweet about all sorts of things. Often he gets into trouble – about clean streets in Rwanda, Afrikaans at universities and an array of other matters.

But on Wednesday he could find solace in neither Twitter nor the numbers he presented to Parliament in his maiden Budget speech. It was always going to be a gloomy read given what we know about the state of public finances – they are in dismal shape, to say the least.

He came to Parliament amid rampant allegations of State Capture coming out of the Zondo Commission of Enquiry. The country has been leaking money like a sieve through waste, mismanagement and corruption. We always suspected the problem ran deep but somehow hearing the details, adds insult to our collective injury.

There has been looting on a large scale. The locus of much of this looting is virtually always via state-owned enterprises. Just about every one of them needs bailing out. But given its strategic positioning in the economy, it was Eskom that loomed large on Wednesday. Recent Stage 4 load shedding has also served to exercise all our minds on this behemoth that is R475-billion in debt.

Last week both President Cyril Ramaphosa and the World Bank country director, Paul Noumba-Um said Eskom was essentially too big to fail.

Mboweni had no choice but to allocate funding to some sort of palatable bailout. It came in the shape of R69-billion over the next three years. Of course, he was clear to say that this would come with conditions such as the appointment of a “Chief Reorganisation Officer”. This individual would not undermine the CEO of Eskom and so would need to be carefully chosen so there is no “job creep”. There is so much “reorganisation” to be done– simply a euphemism for dealing with the rot and corruption on the Zuma years. One senses that the bailout may be extended even though Mboweni was clear to say that the government was not taking on Eskom’s debt.

The finance minister also did not mince his words about SOEs in general when he asked: “Isn’t it about time the country asks the question: do we still need these enterprises? If we do, can we manage them better? If we don’t need them, what should we do?”

And so the next year will be crucial in ensuring that the government is able to take the bull by the horns and do the hard work needed to turn Eskom around. It will be politically complex. And herein lies the rub of political risk. Are Ramaphosa and his team up for the challenge and the inevitable clash with trade unions and those within the ANC who have the knives sharpened for the President’s back? For Ramaphosa, so much rides on the upcoming election and how well he is able to sell his turnaround to a weary public.

Mboweni’s Budget took place against the backdrop of low growth, weak economy and the failure of SARS to collect sufficient revenue. Another indicator of the sick state of the economy is the medium term debt to GDP ratio that will increase to 60.2% in 2023/2024.

It is another sad reflection on the misery of the nine “wasted years” under Jacob Zuma, that SARS, once one of our premier institutions has yet again underperformed and the revenue collection shortfall will be R43-billion and not the R27.4-billion projected in October.

SARS’ capacity has been gutted and while attempts have been made to turn the organisation around and stop further rot, there are normally no ‘quick fixes’ when it comes to rebuilding institutions. Former SARS Commissioner Tom Moyane is mercifully gone and the search for a new Commissioner is underway. That person will need to be someone of unimpeachable integrity with a keen understanding of what needs to be done to retain the expertise within SARS and then to root out the detritus that remains. Increasing capacity at SARS will be key and so the funding allocation to the new illicit economy unit is to be welcomed. It seems we have gone around in circles after the disbanding of the so-called “rogue” unit by Moyane only for Mboweni to essentially revive it again.

Mboweni also focused on cutting the public sector wage bill that accounts for more than 30% of public spending. MPs would also not be the beneficiaries of salary increases. There will be no complaints from the public about that. The bottom line is that the fat must be trimmed all over. Ramaphosa has talked about cutting the size and scope of his Cabinet and then also reducing the number of government ministers. That too would be welcome, as would cuts to the accoutrements of power – cars, bodyguards and an expensive bureaucracy used to prop up people who add very little value to the running of the state. Former president Zuma simply used these positions as a patronage point.

One hopes that post-election, these cuts come swiftly.

Judge Raymond Zondo will be allocated another R273-million for his commission’s work yet the National Prosecuting Authority has not been allocated extra funding for the special investigative directorate that President Ramaphosa announced in his SONA. Quite how this unit will operate now remains to be seen. The bottom line is that to deal decisively with State Capture one needs the funding to investigate and then prosecute. This must surely be a priority?

“Difficult conversation”’ were being had with rating agency, Moody’s, ahead of its 29 March rating announcement, Mboweni admitted.

Difficult indeed. And while the usual nods were given to education, healthcare and land reform, really this budget was about the state of our institutions and public finances- all patently unhealthy, ailing and in need of serious work to stabilise it all. South Africa’s socio-economic challenges are profound. Our ability to retain a cohesive society has always been tenuous. This is the case now more than ever before with unemployment and poverty levels remaining stubbornly high. In addition, as inequality rises our public discourse has become more toxic and marked by deep-seated anger from those who are poor and marginalised. It is for this reason that we need to look behind these numbers and see the nameless and faceless in our society who have been let down by this weak and corrupt state again and again.

Jacob Zuma, the wrecking ball is gone. Yet, we now all bear the burden of paying to fix the economy. It’s a bitter pill to swallow and will be for some time to come because there simply is no proverbial “silver bullet”. That was the singular message of Mboweni’s Budget speech on Wednesday.

Or put plainly, “capture costs”. DM