Will finance minister Pravin Gordhan be able to pull enough rabbits out of the hat on October 26 to stave off an investment downgrade at the end of the year? National attention will soon turn to his "mini-budget", the medium-term budget policy statement . National treasury has largely led the recent charge to persuade credit-rating agencies and investors that SA remains a "going concern" and just needs more time to get its house in order.
It is Gordhan who, together with business and labour, has taken on the main role of lobbying for SA.
Gordhan recently claimed that there was "more than a 50% chance" that SA could avoid a downgrade this year.
Even leaving aside political pressures on treasury, there is a real danger that too much may be expected from the mini-budget. There is little that Gordhan can credibly deliver in pivotal areas of policy that lie outside the sphere of treasury, such as in labour policy. That is, if what needs to be done in SA is not reinforced as a collective effort of the cabinet.
Outside treasury, these steps will need to be broadly significant and tangible enough to persuade credit-rating agencies to give SA the benefit of the doubt.
Moody’s recently stressed that "divisions in politics are SA’s major weakness". This is the case because of the uncertainty about policy direction and whether political tensions will impede structural reform and undermine SA’s credit rating.
Within its sphere of influence the mini-budget has provided certainty and predictability about fiscal policy. Yet uncertainty about implementation remains a challenge, even though the National Development Plan is supposed to have reduced it. Policy uncertainty has had a corrosive effect on investment decisions. And SA needs investment to grow.
The North-West University School of Business, in collaboration with the School of Economics, has introduced a quarterly policy uncertainty index to measure the phenomenon.
Treasury has had to delve deeper into policy and institutions, including SA Airways, Eskom, nuclear power and tertiary education to rectify situations. For good or ill it has become the nation’s bank manager, auditor, counsellor and guardian on several key matters.
Treasury is right to see the public sector in a democracy as requiring single-minded vigilance, especially with current levels of corruption, "state capture" and rent-seeking.
Everywhere has become an ambush against sound finance. Yet in the longer term, fiscal probity is an ethos that needs to be more widely shared in the public sector.
The mini-budget remains the lodestar for the promised fiscal consolidation, at a time of weak economic growth. The IMF forecasts 4.6% growth for emerging markets next year but only 0.8% for SA. Among the "big-ticket" items that need to be "consolidated" into the fiscal targets are the financing of state-owned enterprises, curbing the public-sector wage bill, the nuclear power project, the health insurance scheme and the "fees must fall" commitment.
The mini-budget must now reflect wise spending, not big spending, to meet its fiscal goals and avoid SA drifting into a "tax-and-spend" cycle.
But even if the mini-budget is able to supervise "the three Es of economy, efficiency and effectiveness" in SA’s public finances, it is no longer enough. A sound and cautious fiscal strategy is a necessary condition, but not a sufficient one, to avoid an investment downgrade at the end of 2016.
Rating agencies will also look for visible evidence of good governance, policy certainty, structural reforms and growth prospects in arriving at their decisions. What SA badly needs is political leadership and a national implementation plan that goes beyond fiscal policy.
• Parsons is a professor at the North-West University School of Business & Governance