Carol Paton Deputy editor: Business Day
Michael Sachs. Picture: RUSSELL ROBERTS
Michael Sachs. Picture: RUSSELL ROBERTS

The resignation of head of the budget office, Michael Sachs, a consummate public servant and professional, is a bombshell.

As uncomfortable as Sachs is with the reality that his resignation was a political act — he is at pains to avoid playing politics — his decision is as devastating to the project of keeping the public finances on track as was the firing of Pravin Gordhan.

Sachs resigned because the budget process — a carefully managed, transparent process informed by Treasury and presided over by the Ministers’ Committee on the budget — is dead. In its place we have two things: the President’s Fiscal Committee, headed by President Jacob Zuma and including a handful other cabinet ministers, none of whom have Treasury experience; and the "mandate paper" written by the Department of Monitoring and Evaluation, headed by Jeff Radebe and located in the presidency.

Two weeks ago, Zuma called Treasury director-general Dondo Mogajane into his office and read to them a statement that he planned to release announcing free higher education for students whose family income is lower than R350,000.

The package — drawn up by Morris Masutha, a friend of the daughter of Zuma and Nkosazana Dlamini-Zuma — also included hiking the university subsidy to 1% of GDP and covering the full cost of study (rather than just fees as is done now) to all grant recipients at both universities and technical and vocational education colleges.

The cost of this has been modelled by Treasury to be R50bn a year. Mogajane was told to find the money.

He acted with urgency immediately convening his Treasury team and requesting director-general of Department of Planning Monitoring & Evaluation (DPME) Mpumi Mpofu to do the same. The teams of officials worked on nothing else and through the next weekend to come up with the cuts.

By last week, on the table was the following: cuts to the school building programme; cuts to the Municipal Infrastructure Grant; and large cuts to the defence budget (which is already short of R3bn to pay its soldiers).

The political basis for this chaotic frenzy was not the Heher Commission — which has completed months of work devising a new higher education funding model — but the loose and vague mandate paper, compiled by DPME. In fact, as the officials sat poring over the budget, none of them were privy to the contents of the Heher Commission, which was only very belatedly shared with Mogajane following his meeting with Zuma. By last week, he had still not passed it on.

Not only is Zuma’s plan not informed by the technical work of the committee which he established it is also not in line with ANC policy. At the ANC’s July lekgotla it was agreed that the earnings threshold for free higher education should be raised to R150,000 from the present level of R122,000. The ANC suggested a sliding scale of fees, supported by grants and loans, for those earning more.

It is this process of arbitrary and capricious budgeting, based purely on the whim of one very powerful man, that Sachs has opted out of. Treasury budgeting processes have in the past made explicit and clear the trade-offs. It was on the basis of these decisions that cabinet would endorse the budget.

It is worrying that Mogajane is convinced that what he is doing now is in the interests of the Treasury and the country. In an interview on Sunday, Mogajane said that Treasury and DPME had to work more closely. He also contended that the budget slashing process in which officials were engaged would also lead to debt consolidation and would divert SA away from the horror scenario presented last month in which debt soars to 60% of GDP by 2021.

Clearly, Sachs does not think so.

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