Beleaguered Treasury needs to be bolstered by Ramaphosa

BusinessLive

03 DECEMBER 2020

President Cyril Ramaphosa recently highlighted the need to address the shortcomings of the public service. But where to start?

Maths teachers, health workers and civil engineers are scarce. Tenders have spawned rampant corruption. The poorest third of municipalities are close to collapse.

Lines of accountability between senior politicians and officials are contested, and appointments are routinely made on the basis of politics rather than expertise.

However, amid the hand-wringing little attention has been paid to the greatest emergency in the state: a vortex of decline that threatens the National Treasury.ADVERTISING

The Treasury implements rules about how public monies can be spent, and applies rudimentary quality control to the spending fantasies of government ministers.

It has not been a perfect machine, and it has been through inevitable conflicts with more interventionist and “strategic” departments. Its role in the budget process has predictably left it vulnerable to sloganeering about “neoliberalism”.

The Treasury has also faced many of the same challenges as other parts of the state in finding capable and reasonably impartial personnel. Unlike other departments, it has avoided what the Public Service Commission calls “reckless cadre deployment”.

Today, however, we see two convergent trends that threaten to destroy the capacity of the Treasury, just when it is most sorely needed.

The first trend is that the number and depth of capable officials is depleting. Key staff — many of them former ANC-aligned exiles or activists — have retired quite naturally. Others have moved to the SA Reserve Bank, most notably the bank’s governor and one of the deputy governors.

The state-capture debacle saw the departure of director-general Lungisa Fuzile and budget office head Michael Sachs. However, resignations in 2020 included a new generation of recruits. These include far younger chief directors of financial markets and stability, and of macroeconomic policy. Other key positions, such as chief procurement officer and accountant-general, have passed long periods with “acting” incumbents.

The second trend concerns growing pressure on the Treasury. As the fiscal crisis has deepened the Treasury’s role as the budgetary “no-man” has fuelled resentment across the state. In the past expenditure freezes have been pushed down to different tiers of government or to departmental managers. However, the deeper cuts necessitated by the Covid crisis are prompting open rebellion against the rectitude demanded by the centre.

The Treasury has to be at the top of its game to steer government along (roughly) the projected fiscal path the finance minister set out in the medium term budget policy statement. Many of the potential pitfalls it then highlighted — a Covid second wave, further ratings downgrades, municipal debacles, contingent liabilities to Eskom and the Road Accident Fund, and bailouts to other state owned enterprises — have already been realised. And who would now bet on the government’s ability to restrain public sector pay rises?

As these two trajectories — declining capacity and growing demands — increasingly collide, crisis mismanagement and declining credibility are ensuing: a delayed medium-term budget policy statement, a fiasco over SAA, confusion about the public sector wage freeze, and botched exchange control relaxations.

And this is just the beginning. The probability of an enhanced growth path is steadily receding and the likelihood of debt default is equally steadily growing. What the Treasury has to do, and the human capacities it has to cope, will further diverge in the months ahead.

Ramaphosa’s government needs to take action right now to retain, bolster and restore the Treasury capacities we need to steer the country through this crisis.

Otherwise, it is people who are not South Africans at all, but rather officials of international banks and financial institutions, who will be in charge of the next set of key decisions about how resources should be allocated by the SA government.

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