EDITORIAL: Zuma’s fee plan: a ratings calamity
But if the economics are disturbing, so too are the murky politics of Zuma’s plan
Michael Sachs’ departure as head of treasury’s budget office is as much a tragedy as it is hugely disturbing. Sachs, an astute technocrat who also has impeccable ANC credentials, has headed that budget office for the past decade.
During that time, he served three finance ministers (including Pravin Gordhan, twice) and led the crafting of a budget framework that allowed government to weather the global financial crisis, stay the course of fiscal consolidation and stave off being junked by the rating agencies — despite hard economic times and lunatic politics.
Sachs is the sort of person you can’t easily replace. Nor is it easy to replicate the brand of credibility he brought to the budgeting process.
But the chain of events that led to his resignation is even more disturbing. Hardly a week after finance minister Malusi Gigaba presented his medium-term budget, treasury officials found themselves spending the weekend digging into the (already announced) departmental budgets to find R40bn to pay for President Jacob Zuma’s free higher education plan in a single year, 2018.
Needless to say, Zuma’s plan — to provide totally free education for income levels up to R350,000 as well as an extra subsidy for universities — goes against the recommendations of the Heher commission, the Davis tax committee and even the ANC’s own policy. And it overturns the budget framework that has now, essentially, been trashed — on Zuma’s instruction.
This has profound implications for the disciplined approach to fiscal policy that the ANC government put in place so fastidiously in the early years of democracy, and which it stuck to.
It seems Sachs decided he simply couldn’t keep pretending everything was fine. The façade had to be stripped away, so the country could see how grim it really is in the budgeting kitchen.
You can’t blame him. Gigaba’s budget already made it clear that government’s lip-service to fiscal consolidation has become a sham: he announced no plans to plug the gaping revenue hole or to stabilise the public debt, which is now set to rise towards 60% of GDP.
To get back on the right path, SA needs either R40bn of tax hikes or expenditure cuts in the next fiscal year. But rather than finding those cuts, treasury now has to raid budgets to unearth a nonexistent R40bn to placate Zuma.
On November 24, Moody’s and S&P Global Ratings release their ratings — and a downgrade is all but inevitable. If the numbers alone haven’t convinced them, the attack on treasury surely will have. Those agencies have long warned that slipping institutional strength will be a trigger. And it doesn’t come clearer than this.
But if the economics are disturbing, so too are the murky politics of Zuma’s plan. With university campuses relatively calm, Zuma’s gambit can’t be a response to #FeesMustFall protests. (Indeed, many of the "fallist" students might be horrified to hear that school building budgets must be cut to fund the free fees.)
Rather, it seems to be a bizarre populist attempt to demonstrate the Zuma faction’s "radical economic transformation" credentials to the ANC’s elective conference. The plan has been driven by Morris Masutha — romantically linked to Zuma’s daughter Thuthukile — who led student protests at Wits last year even though he wasn’t a registered student.
As News24 reported, Masutha was also a spy on the books of the State Security Agency, which casts a terrifying new light on the protests.
Either way, only the ANC itself can stop Zuma — which highlights the stakes of the December conference. But whoever wins will find that critical institutions, once damaged, are hard to fix.