Malusi Gigaba’s ‘radical’ U-turn
If a week is a long time in politics, a month seems to be an eternity when it comes to matters of policy — specifically, when it comes to ‘radical economic transformation’, as opposed to ‘inclusive growth’
Finance minister Malusi Gigaba seems to want to be Pravin Gordhan. In recent days Gigaba seems to have adopted, virtually wholesale, his predecessor’s rhetoric and policies.
Given the rand’s recovery (clawing back 50c of the R1.50 it lost against the dollar), it seems investors are willing to give him the benefit of the doubt.
Wooing a small group of investors at the Development Bank of Southern Africa in Midrand last week, Gigaba dropped President Jacob Zuma’s "radical economic transformation" catchphrase in favour of "inclusive growth" — a nuance that will be appreciated by asset managers, if not leftists in the ANC.
Tellingly, it’s the same position Gordhan held during his tenure since December 2015.
Gigaba seems to have learnt from his first media briefing in the finance minister’s chair, when he mentioned "radical economic transformation" a few times. The rand fell after that briefing, which seems to have dimmed Gigaba’s appetite for the term.
The new minister seems to have realised the importance of not scaring off investors
It’s somewhat ironic, considering Gigaba was hired by Zuma as the anti-Gordhan, to give fuel to his populist plans. And yet, Gigaba has taken a line akin to that of Gordhan and his deputy, Mcebisi Jonas, in the months leading up to the cabinet reshuffle.
Conveniently, amid calls for Zuma to step down, Gigaba has managed to distance himself from the ANC catchphrase.
"The investors want the ruling party to explain in detail what it means by radical economic transformation," said Gigaba.
Only, he didn’t explain it. This was his chance to provide clarity and sketch out a tangible plan. Instead, in his briefing to the media on the sidelines of the investor briefing last week, he provided only a scant explanation of "inclusive growth," which has since characterised all of his briefings.
"What I assured [the investors] is when we talk about inclusive growth and the package of policies, it’s exactly the same programmes that we all are concerned about," said Gigaba.
These are to create jobs, and to address poverty and inequality. "We want programmes that are going to include as many people who are excluded from economic participation as possible."
It’s eerily similar to what Gordhan preached — only it seems to have worked.
Investors came out of the closed meeting singing his praises. "We finally got a little more clarity and I felt comforted by that," said Lesiba Mothata, chief economist at Investment Solutions.
And, coincidence or not, the currency has strengthened against the dollar.
The real difference is that Gigaba — unlike Gordhan — comes with Zuma’s approval, and all the political backing that implies.
But it doesn’t end there. Gigaba also seems to be sticking to his predecessor’s fiscal policies. He secured more investor confidence by assuring investors that policy was "unlikely to change" and that the medium-term budget would remain the same.
"I have given the guarantee that on the level of government, we are completely committed to the previous policies and programmes," he said.
"I don’t come here with preconceived ideas of what needs to be done, with a magic wand to change things and to improve them. I come here to ensure government programmes are implemented."
Argon Asset Management economist Thabi Leoka said it was reassuring that Gigaba had promised there would be no changes, especially on fiscal consolidation. "[Changes in fiscal policy] could change things for the worse; it could trigger another downgrade," said Leoka.
For Leoka, the meeting with investors was a positive move and she felt the minister had alleviated investors’ fears.
The credit rating downgrades from S&P Global and Fitch Ratings seem to have scared Gigaba enough to back down from anything radical. Instead, investors are holding on to signs that Gordhan’s policies will continue for the next three years.
It’s a far cry from Gigaba’s first press conference, where he declared he would "unapologetically" use the state’s R500bn procurement bill to implement "radical economic transformation", and that things would be very different at treasury. It was, he said, an end to "orthodox economists, big business, powerful interests and international investors".
And yet last week, he was falling over backwards to woo these exact people.
"[Treasury] is a strong, professional and stable institution, and we want to keep it that way," he said. "We are happy with the skilled and experienced team we found here, and trust they will remain, as patriotic civil servants who are appointed permanently or on long-term contracts and [who] do not come and go when political principals change."
It’s a reassuring tone, even if investors aren’t entirely convinced. But the fact he seems to have abandoned the word "radical" will be seen as a positive step for investors who have lent the country R2.2 trillion.