Leftist attacks on treasury: time for an apology

Published in Business Day, 26 October, 2009, under the title, ‘Excluding treasury will serve Zuma, not the left’. Anthony Butler.

The South African Communist Party (SACP) and the Congress of South African Trade Unions (COSATU) have become disoriented dupes of President Jacob Zuma’s conservative administration. Leftist intellectuals have abandoned planning and instead adopted an ill-advised critique of “treasury domination”.

First, the left wants treasury stripped of its control of economic policy. SACP theorists complain that the economy is still dominated by resources groups, and by financial and agro-processing conglomerates. Growth is not absorbing available labour, savings are low, and the small business sector is stagnant.

Why are these pathologies the treasury’s fault? Treasury has allegedly been obsessed with fiscal and monetary stability and an excessively conservative pursuit of low inflation, all buttressed by an “indefensible” inflation targeting regime.

Treasury “bean counters” have supposedly disallowed strategic industrial policy and obstructed the developmental mobilisation of state-owned agencies and infrastructure programmes. They have also overlooked the positive externalities that public investment in health, education and rural development could generate.

The treasury has been under even heavier fire for its second key role as manager of public expenditure. Its macro-economic stance allegedly obliges it to control spending at any cost. Its junior officials veto programmes that might increase human welfare and expand the productive potential of the economy. A treasury preoccupied by bilateral wars of attrition with individual departments has meanwhile failed to introduce overarching appraisals of the value of public spending.

Treasury’s third key role has been in the strategic co-ordination of government. The left complains that treasury’s divide-and-rule negotiations with individual departments are incompatible with the planning, long-term strategic thinking, and information-sharing required for effective governance.

This treasury critique is in some respects highly persuasive, but the left’s proposals for corrective action are poorly considered. In the absence of credible alternative economic policies and instruments, stripping the treasury of power is worse than futile.

Where the left has been given free rein to develop such alternatives — in creating new regulatory institutions, formulating industrial policies, leveraging infrastructural programmes, and setting out sector strategies — progress has been painfully slow or non-existent. Private and state monopolists have meanwhile used the languages of “strategic development” to cloak planning fiascos and procurement abuses.

Jacob Zuma has been here before and he knows that economic development minister Ebrahim Patel has few policy cards to put on the table. When Zuma and his then comrade-at-arms Thabo Mbeki were last suppressing the left in the mid-1990s, they used exactly the same ruse: they assigned a lame-duck economic portfolio (the RDP office) to a mild-mannered and institutionally disempowered trade union leader.

On public spending, the left’s diagnoses are again more persuasive than its remedies. The treasury, for all its failings, has introduced a culture of justification into the public expenditure process. Every supplicant alike – a leftist minister proposing a strategic investment, a rent-seeking special interest, or an opportunist looking to boost his personal patronage powers — has been obliged humbly to justify his demand for scarce resources.

Treasury officials can be arrogant and they sometimes cut out good proposals along with the bad. But treasury arrogance and discipline have partly insulated national departments against the disorder and financial mismanagement that plague provincial and local government.

The treasury’s coordination and planning failings are well known. A year ago, the left championed the planning commission to address precisely these limitations. Suddenly the left has turned full about and instead now backs what may be far-reaching changes to the functioning of the cabinet system.

National government coordination has rested on a system of cabinet subcommittees or “clusters” that bring only relevant ministers and officials into play. Over the past decade, treasury has been represented on all cluster committees at all levels to ensure that resource considerations are mainstreamed into policy development.

Last week, the presidency announced that reorganised ministerial committees for human development, social protection, and justice would henceforth have no finance ministry representation. Forum of Directors-General (FOSAD) clusters are to be “re-configured” in the same way.

If true, this is a dramatic and foolhardy change. It is hard to believe that treasury representatives should be absent, at any stage, from committees that take decisions with major resource implications.

The SACP and COSATU may have been misled that the human development cluster can now formulate public policy on national health insurance, or higher education and training, without being subjected to treasury-imposed financial discipline. The real beneficiaries of treasury exclusion will be Zuma’s close political allies in the justice cluster who may now treat even cursory treasury oversight as beneath them.

Zuma has chosen provincial politicians with provincial mindsets to chair many of his cabinet committees. If the treasury culture of justification continues to be eroded by its unthinking detractors, the provincial patronage-based tender and procurement model may firmly establish itself across the national sphere of government.

 

Butler teaches politics at Wits University

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