Finance ministers under fire

Finance minister Nhlanhla Nene’s testimony to the Zondo commission of inquiry into state capture was certainly gripping.

Nene testified that he repeatedly refused to sign a letter committing SA to a Russian nuclear build programme. He detailed how the finance ministry denied government guarantees to PetroSA that would have enabled the parastatal to purchase assets from Malaysian giant Petronas. He also explained that his veto over former SAA chair Dudu Myeni’s proposals to manipulate an Airbus contract deeply antogonised then president Jacob Zuma.

Nevertheless, despite the impression Nene’s testimony has created, the embattled situation of the National Treasury is more or less a permanent condition. It is true that Zuma helped the Gupta family climb to the top of SA’s dung heap of corruption and rent-seeking. But the dung pile itself predates — and will certainly postdate — his presidency.

The Treasury has always been a target for hostility. It denies politicians opportunities to boost their personal patronage powers. It engages in bilateral wars of attrition with departments that leave a residue of bitterness. Critics on the left love to take potshots at Treasury policy priorities such as fiscal and monetary stability.

Long before the Zuptarian revolution, finance ministers were obliged to engage in endless political horse trading. Under one former finance minister, Trevor Manuel, the Treasury was awarded top prize in the International Budget Partnership’s open budget index for its transparency. Despite such international acclaim, however, the ostensible legal strictures that prevented Nene from signing off on a nuclear deal did not deter Manuel from adding his signature to the strategic arms procurement package.

Links between the fundraising machine in Luthuli House, ANC-aligned business vehicle Chancellor House and huge investments in coal generation plant would surely not have escaped the finance minister’s attention.

Manuel’s successor, Pravin Gordhan, was another public servant of exceptional intelligence and integrity. On his watch, however, the cost of Transnet’s Johannesburg to Durban pipeline escalated from R10bn to R25bn in the space of two years. Hundreds of billions were committed to rail rolling stock and port infrastructure.

In the face of such parastatal extravagence, Gordhan approved the extension of loan guarantees of R350bn to Eskom in October 2011. SA’s high level of contingent liabilities has since contributed to ratings downgrades and escalating borrowing costs. The guarantee framework subordinated the rights of the government to those of all other creditors.

Gordhan and the Eskom board were predictably swept aside. The rot quickly spread from secretive construction contracts at Kusile, Medupi and Ingula to inflated operational expenditures, most notably in the coal supply chain. These disastrous outcomes were not initiated by Zuma or the Gupta family. Indeed, they had roots in well-intended ANC policy documents, such as the New Growth Path, which portrayed state-owned enterprises as the key to state-led growth.

In 2010, newly appointed public enterprises minister Malusi Gigaba told the presidential commission of inquiry into state-owned enterprises — another waste of time and money — that massive loans and guarantees to such enterprises would “double the rate of economic growth”.

The Guptas were not the first entrepreneurs to try to “capture” government and parastatal procurement, to subordinate financial intelligence and revenue services, to access the funds managed by the Public Investment Corporation or to secure state loan guarantees for huge and opaque expenditures. Nor will they be the last.

Nene is the latest in a line of capable finance ministers who have been as honest and forthcoming as their circumstances allow. The predicament of Nene’s successors will not be resolved by shining a spotlight on a single president or by demonising one adroit and opportunistic family.

 

• Butler teaches public policy at the University of Cape Town.

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