TOUGH TALK: Minister of Finance Pravin Gordhan speaks to President Jacob Zuma at the Union Buildings in Pretoria. Picture: GCIS
President Jacob Zuma’s reappointment of Pravin Gordhan as finance minister was a hospital pass, considering the circumstances of the move and the state of the economy. Picture: GCIS

FINANCE Minister Pravin Gordhan has probably forgotten the words he used early in 2014 to describe the economic circumstances that coincided with President Jacob Zuma’s rise to the Union Buildings.

Speaking in Parliament, Gordhan said: "Your administration, Mr President, took over an economy which one would call in rugby a hospital pass."

He was referring to the global recession that caused great difficulties at home and abroad. Back then, the Zuma-Gordhan relationship was that of a president and a minister — typically a boss and subordinate.

On December 13 last year, Zuma gave Gordhan a hospital pass, reappointing him to the finance portfolio after the investment community and civic society had rejected Zuma’s now-you-see-him-now-you-don’t finance minister, Desmond van Rooyen.

Gordhan’s return to the finance ministry — which he left in 2014 after five years at the helm — is akin to a movie star "coming back by popular demand". But his responsibilities are huge: the economy is looking to him for leadership, while political patronage systems are bleeding the state dry.

Tomorrow Gordhan will be the main actor as SA begins an important stanza in its contemporary economic evolution story. He has to start repairing the damage caused by Zuma’s capricious decision to appoint a new finance minister on December 9 last year, which eroded the government’s credibility.

The whole country is looking to Gordhan to steer SA away from the economic iceberg. Tangibly, he has to do something to avoid a downgrade of the country’s sovereign credit rating to junk status.

During his previous stint at the Treasury and a decade as the country’s chief tax collector, he proved that he has the know-how to handle the government budget. But his situation now is compounded by several political factors.

Some of these stem from the circumstance of his reappointment at a time when Zuma’s star is waning — evident when the president was effectively forced to rehire Gordhan into the post he removed him from after the 2014 elections.

In their current relationship, the finance minister is the more credible, and in many respects the more powerful, politician. But the African National Congress (ANC) spins a complex web of ideological and other contradictions that will make it difficult for the Treasury to rein in the government.

Independent political analyst Aubrey Matshiqi says the finance ministry will be "squeezed from three sides": the demands of the rating agencies; trade union expectations and resistance; and social unrest as SA "heads into a perfect storm of discontent", with student activism and protests by the poor a sign of things to come.

The ANC’s relationship with the Congress of South African Trade Unions (Cosatu) leaves very "little room" for Gordhan to manoeuvre, he says.

"A lot of Cosatu affiliates’ members are public servants, which means there’s little room for (Gordhan) to take measures that will be alienating to Cosatu," Matshiqi says.

At least politically, any decision to increase taxes that directly affects the middle and working classes and the poor would be unpopular, especially in an election year. "If there are increases in the personal taxes of the middle class, they will be marginal," Matshiqi says.

"He can’t hit the personal income of the lower middle class and the working class, or even the middle class too, as it has been squeezed quite tightly."

WHILE Gordhan can get away with increasing the taxes of the "rich and the super rich", a marginal increase in value-added tax "exposes him to the unhappiness of the poor, the working poor and the working class", Matshiqi says.

Alan Hirsch, the director of the Graduate School of Development Policy at the University of Cape Town, has seen finance ministers manage difficult circumstances, but nothing comes close to matching Gordhan’s current challenges.

There were difficult times in the 1990s, and around 2009 due to the global recession. "But I think it’s more difficult now, because there’s much less optimism in the country and the government does not have a whole lot of credibility," Hirsch says.

"(Gordhan) has a relatively strong hand to play, and hopefully that gives him some advantages, which he will use."

Hirsch, a former public servant, has an intimate understanding of how SA’s bureaucracy works and has seen over the years how a president lays the groundwork for the finance minister.

He says that while Zuma’s recent state of the nation address dealt with major issues that concerned the business community and the ratings agencies, the speech was "too light on detail around key economy policies".

"It’s the president who must give the minister of finance the kind of moral support that he needs to do the difficult things that he has to do when he presents the budget. You would have thought that if there were some more serious measures to be taken, they would have been detailed a bit more in the state of the nation address," Hirsch says.

But the problems SA faces are too big for one man to solve. The country has a leadership deficit — not enough people are dealing with the future in a consistent manner. Several public institutions have crises of governance, and the government’s credibility is very low.

"The most important thing is to show we are committed to rebuilding trust in society as a whole — trust between citizens and politicians, trust between labour, business and government — and that depends on having much more consistent policies and not changing ministers and policies for questionable reasons," Hirsch says.

"More consistency in approach is needed, and real commitment to solving problems."

He says a further downgrade would make life difficult for the public and private sectors, but with the right approach to leadership, "SA can still rise."

"If you had a leadership in the country that was able to consistently win trust from broad society — including labour and the business community — I don’t think it would take more than a couple of years to get back in shape. I think the Treasury is still a very strong institution," Hirsch says.

"There are good people in government today — in the Cabinet, the senior officials. The integrity of the system is not broken, but it is in danger and I hope we will be able to prevent it from breaking down."

SA has to avoid having to go to the International Monetary Fund (IMF) for a bail-out, says Hirsch, who led SA’s team that negotiated a World Bank loan in 1998.

"It always is embarrassing for a government to go to the IMF. It’s better to show you can sort out your own problems," he says.

"If you can show the rest of the world that you can deal with your debt problems yourself, then the chances of moving up in the ratings will probably increase."

BUT South Africans are resilient. Hirsch says the country has weathered tough times and democracy remains strong.

"Things happen in the early periods in democracies that are distasteful and discomforting. But our democracy is very resilient," he says. "I think the strength of civil society and the Constitution, the judiciary, the trade union movement, the churches, and the media are really important elements in a resilient society."

Mac Maharaj, who worked with Gordhan in the underground resistance against apartheid, describes him as a gritty doer, able to deal with complex problems.

"Pravin has a strong strategic sense and a very good tactical intuition, but he’s very focused on getting things done and he’s very firm," Maharaj says.