Cape Town - The new/old Finance Minister, Pravin Gordhan, will have a mammoth task when he delivers his sixth budget speech in less than two weeks on 24 February.
Gordhan, who was moved to minister of Co-operative Governance and Traditional Affairs in 2014 when President Jacob Zuma took his second term of office, was surprisingly reappointed in December last year after his predecessor Nhlanhla Nene had been unceremoniously removed and replaced by the little known Des van Rooyen.
It came as little surprise that Zuma dedicated most of last night’s State of the Nation (Sona) address to South Africa's dire economic situation, blaming its low GDP growth mainly on global circumstances. He was, however, vague on how the ship should be turned around – a task that will fall squarely on Gordhan’s shoulders.
Says political analyst Daniel Silke: “[Zuma] rattled off a series of broad-brush strokes, seemingly a direct consequence of the heightened interaction with business leaders over the past few weeks.”
Last night, Zuma repeatedly made reference to Gordhan’s upcoming budget speech. “It was almost as though he had deferred the real meat to his finance minister,” Silke said. “Perhaps Sona should’ve been renamed ‘Prelude to a Budget’ as that now will be the speech to watch.”
To his credit, Zuma announced comprehensive measures to curtail spending, such as that government departmental officials would need to give sound reasons if they intend to travel overseas, while lavish parties and social functions would also be phased out.
The spending cuts seemed to have already kicked in, as the accustomed post state of the nation gala dinner didn’t take place last night. Modise Kabeli, from Parliament’s Communication Unit, confirmed that the function didn’t take place to set an example that government was serious about the austerity measures that Gordhan had announced in 2013 already.
Peter Attard Montalto, executive director and senior emerging markets economist at the Japanese investment bank Nomura, said in a company note that Zuma’s speech itself had very little substance. “The broad sense was of a speech written in parts heavily by National Treasury to make the right noises.”
But Montalto didn’t think Gordhan yields nearly as much power over government policy as some people may think. “The question will arise of whether everything is being left up to Pravin Gordan and his budget … We doubt that.”
Zuma’s speech contained a substantial number of “left wing policy statements”, Montalto added, which showed the political constraints around Treasury.
Kevin Lings, Stanlib economist, told Fin24 that he got the sense Gordhan will back up of some of Zuma’s utterances about the sale of non-core state-owned enterprises and more detail on spending cuts across government.
“The finance minister will probably set out the fiscal policy and clarify some of the issues Zuma alluded to,” he said.
NKC African Economics said in a company newsletter that Zuma’s address last night contained “none of the bombshells or rapid-fire reforms that were necessary to make it memorable”.
“However, the economy is seemingly taking centre stage for change. The real test of government’s strategy to turn things around will be when Finance Minister Pravin Gordhan takes stage to deliver his first budget speech since his bizarre return to top job at National Treasury.”
RMB economist John Cairns said on Friday that the speech was underwhelming.
“There was no indication of major tax hikes, meaning spending cuts and a government headcount freeze will be used, probably unsuccessfully, to keep the rating agencies at bay,” he said in a note. “Given the economic pressures, we had hoped for more.
“Overall, this barely met the grade for talking the talk, never mind showing that the government is set to walk the walk. Minister Gordhan, all eyes are now on you.”