2020-05-08 11:06
Ramaphosa should make it clear who in his Cabinet is responsible for driving the country’s economic trajectory. Yes, everyone, including the president, has a role to play, writes Mpumelelo Mkhabela.
President Cyril Ramaphosa must make a choice: affirm Finance Minister Tito Mboweni or appoint someone else he is prepared to give sufficient backing.
Fence-sitting can hardly constitute a choice when we are facing an economic crisis of unprecedented proportions in all economic indicators.
It’s either Ramaphosa supports the former central banker whom he went at great lengths to convince to accept the job as finance minister or he doesn’t.
His decision will communicate a clearer message on where he stands on macro-economic reforms, particularly those proposed by Mboweni.
Absent a clear presidential stance, Mboweni has been a frustrated minister.
Lacking in diplomacy, Mboweni has vented his frustration on Twitter, breaking his undertaking to stop posting his thoughts on the social media platform.
At the heart of the problem is that he is not getting his way on major economic matters, including those that have a direct bearing on the management of the country’s economy in general and the finances in particular.
On key issues such as the disposal of debt-addicted state-owned enterprises, labour laws for small businesses, containing public expenditure, black economic empowerment criteria for Covid-19 business relief funding and sale of cigarettes and liquor products during lockdown, Mboweni has not received support from the majority of his cabinet colleagues.
He comes across as defeated in an environment that elevates majority rule above evidence-based thinking.
In philosophical parlance, Mboweni is a positivist, not populist.
In some instances, such as his initial proposal to seek support from the International Monetary Fund for Covid-19 funding, Mboweni faced opposition from Luthuli House and Cosatu House.
Ramaphosa should consider taking a look at president-finance minister relationships in the United States and South Africa during crises previously.
A few examples are worth mentioning:
Untenable: George Bush Sr and Paul O’Neill
O’Neil was President Bush’s Treasury Secretary at the onset of the US budget crisis when the administration implemented tax cuts and planned a war against Iraq. O’Neil opposed both.
Like Mboweni, the wealthy finance chief had a reputation for being outspoken whenever he thought the government took economically senseless decisions. He served for only two years before his relationship with Bush became untenable.
Bush fired him. But, as the Reuters news agency reflected on O’Neill’s life – he died of cancer last month – his opposition to tax cuts and the invasion of Iraq was vindicated.
The Bush administration bequeathed Americans with a hangover of a budget deficits and fiscal cliffs.
It left the country’s reputation in tatters after the claims of Iraqi weapons of mass destruction were found to be false. It was left to the Obama administration to pick up the pieces.
Mboweni could be released, only to be vindicated with time.
Audacious: Thabo Mbeki and Trevor Manuel?
The two had the most productive working relationship. Mboweni would see them in action. He was part of the team. They set monetary policy framework which he had to execute as Governor of the South African Reserve Bank.
This proved successful as the local currency retained its integrity and inflation was managed.
But their main success was on fiscal policy, managing the overall budget towards a surplus that allowed for social expenditure expansion to deal with poverty among those for whom economic growth?had not translated to jobs.
Manuel, the finance minister, was once asked who his favourite economist was. He didn’t hesitate: President Mbeki. Clearly their relationship worked well partly because Mbeki not only took a keen interest on economic issues, he led on them in the ANC, in cabinet and in negotiating with the Left.
Mbeki had a reputation for paying attention to even the smallest detail, particularly economic statistics. He didn’t mind being unpopular.
That made the job of his finance minister politically palatable when popular decisions were made.
They faced criticism together from ideological opponents on the Left, but voters applauded with a two-thirds majority in 2004.
Trust: Barack Obama and Timothy Geithner
Faced with a broken financial system that was causing havoc in the United States and in the world economy, President Obama needed a fixer, a technocrat who understood the nature of the problem and could produce solutions.
His search led him to Geithner, whose confirmation in Congress was made difficult by a barrage of queries about his tax affairs.
The treasury secretary put together a team that came up with proposals to reform banking regulations and inject liquidity in the private banking system.
The reforms were so wide-ranging they were bound to face stiff opposition in the Washington-style political gridlock.
In his book, Stress Test, Geithner writes that the reforms put his team in a political no-man’s-land: doing enough for the Right to hate but not enough for the Left to like.
“Conservatives thought we were profligate socialists, and liberals thought we were in bed with banks.”
Geithner saw off powerful vested interests including the likes of Boeing that opposed the reforms.
What did this mean for him?
“From my perspective, the flak we were taking from every side reflected the impressive extent to which policy trumped politics in the Obama administration,” he says.
Obama repeatedly made it clear that he wanted the right thing done even if it wasn’t popular.
“He showed a remarkable degree of deference to our substantive policy judgements.”
For this, Geithner admired Obama, as he allowed the team to end the crisis, fix the economy, and reform the financial system and thereafter allow the public to judge the results.
Could Mboweni be given similar space?
After all, there’s no political gridlock in our parliamentary systems, at least not the formidable type Obama confronted in Washington.
In South Africa it’s about political will.
Rocks-in-throat: Ramaphosa and Mboweni
The least preferable, if not dangerous, option is for the Mboweni frustration to remain permanent without a resolution. It would translate to economic policy uncertainty.
This is where Ramaphosa’s consensus leadership style could be headed.
He needs to tweak his approach.
So far, he doesn’t want to offend any stakeholders, including ministers who serve at his pleasure.
Ramaphosa should make it clear who in his Cabinet is responsible for driving the country’s economic trajectory. Yes, everyone, including the president, has a role to play.
But who is the leader on the economy?
So far, Mboweni feels strangled by the majority. As he put it on Twitter,?”it’s like swallowing rocks”.
– Mpumelelo Mkhabela is a regular columnist for News24.
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