Ryk van Niekerk
4 minute read
7 Sep 2016
9:00 am

October 26 is D-Day for SA’s immediate political future

Ryk van Niekerk

Mini-budget will shed light on the short-term financial implications of current political hot potatoes.

Former finance minister Pravin Gordhan. Picture: Supplied

October 26 2016 is becoming a critical date for South Africa.

It is only 50 days away, but in the current political environment it is probably a lifetime.

It is, of course, the date of the Medium Term Budget Policy Statement (MTBPS) which finance minister Pravin Gordhan will present in Parliament. The statement is destined to shed light on the short-term budgetary plans for various political hot potatoes that have dogged the political economy since President Jacob Zuma fired Nhlanhla Nene in December last year.

Theo Vorster of Galileo Capital highlighted the importance of the MTBPS during a recent RSG Geldsake radio show, and I could not agree more. The statement will be absolutely critical in our uncertain and chaotic political environment. It will, in theory at least, spell out government’s spending priorities for the next three financial years, and hopefully provide some prospective on where government will focus future spending.

We have to thank Trevor Manuel for the MTBPS. He instituted this report-back shortly after he became finance minister in 1996. It is announced eight months after the national budget (which focuses predominantly on spending plans for the next financial year) and is intended to provide a window on government’s medium-term or three-year spending plans. This was done to make government’s spending plans more predictable, especially after the previous government used the budget as a tool to pursue short-term political agendas.

Last year, the usually-staid MTBPS was accompanied by fireworks when the Economic Freedom Fighters disrupted the House and students stormed the parliamentary precinct as part of the #FeesMustFall campaign. This year there may be fireworks again, although it may be within the confines of the National Assembly.

2016 MTBPS

Almost as important as the actual spending plans, will be who will stand up to address the House. Hopefully it will be Gordhan, but he still has 50 days to ‘survive’.

Recent actions by the Hawks have made his short-term political future extremely uncertain, and it would not be a big surprise if another individual takes the proverbial stand. If this happens, the MTBPS could even be more significant. But let’s not put the cart before the horse.

As Vorster highlighted during the radio interview, all eyes will be on government’s plans for nuclear expansion and the amount budgeted for State-owned enterprises such as Eskom and the South African Airways (SAA).


The nuclear plans are the most significant. The plans, which unfortunately are tainted by the stench of corruption, are rumoured to cost north of R1 trillion – an amount that is roughly the total tax revenue Sars will collect this year. It will be the single biggest cheque government has ever signed – bigger than the arms deal, bigger than Medupi and Kusile.

If approved, government debt would explode, and increased interest repayments would have a devastating long-term financial implication on South Africa.

Gordhan’s refusal to sign this guarantee is reportedly one of the key reasons for the desire to remove him from office.

The nuclear debate is more pronounced now than in 2015. Last year there was concern about a major announcement, but Nene only budgeted to spend R200 million over three years for “preparatory” work.

The 2015 MTBPS only mentions the word ‘nuclear’ in one short paragraph on page 13 of the 69-page document. It read:

“Government is revising its integrated resource plan, which maps out the country’s future energy mix, including options for renewables, coal, gas and nuclear power. With respect to the latter, the National Treasury is working with the Department of Energy to consider the costs, benefits and risks of building additional nuclear power stations. Over the medium term, R200 million will be allocated to support preparatory work for nuclear procurement.”

Expect a slightly longer paragraph in the statement on the 26th.

State-owned enterprises (SOEs)

In comparison, the 2015 MTBPS provided much more detailed information about guarantees and additional funding for SOEs. Total guarantees listed amounted to R470 billion, of which the bulk went to Eskom, the South African National Roads Agency Limited (Sanral) and SAA.

But the 2016 announcement will focus more on the support for SAA than other SOEs. The bankrupt airline is also tainted by corruption allegations and is a prime example of destructive mismanagement of a State asset. The fact that Dudu Myeni retained her chairmanship after her previous board became a token of dysfunctionality, shows political interference of the highest order.

The budget allocations for SAA support over the next few years would therefore be a critical barometer of the disagreement between National Treasury (read Gordhan) and Zuma.

Two MTBPS statements?

It is not inconceivable that two versions of the 2016 MTBPS are being drafted. One within the corridors of Treasury and the other somewhere else, maybe even in Saxonwold. Hopefully sanity will prevail during the next 50 days and we could see another ‘boring’ MTBPS that is a mere extension of the predictable statements we have seen in recent years.

That would be the most surprising statement! And hopefully Gordhan presents it.

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