What Nhlanhla Nene was beginning to do before he was fired was to raise revenue (through higher taxes), lower expenditure (by curtailing the growth of government salaries) and bring spending by State-Owned Enterprises under control. It is the key to understanding the current situation, writes Ivor Chipkin.
— Featured in Daily Maverick
What Nhlanhla Nene was beginning to do before he was fired was to raise revenue (through higher taxes), lower expenditure (by curtailing the growth of government salaries) and bring spending by State-Owned Enterprises under control. It is the key to understanding the current situation.
Hours before the NPA’s Shaun Abrahams announced that warrants had been issued for Pravin Gordhan and Ivan Pillay, the Wits SRC President, Shaeera Kalla, was on radio. She was elaborating further on her council’s demand that Wits remain closed until the “government of South Africa makes a commitment to legislate free, decolonised education for all now”. Perhaps, she speculated, the university could re-open if the Vice Chancellor, Adam Habib, and staff joined students and workers on a march to the National Treasury.
This was a new development. In the statement from October 7, the SRC only called for a march on “national and provincial sites of government”. Why was National Treasury the target?
It would be too easy to see in the position of the SRC the cynical manipulation of Zuma-aligned agitators, especially that such a march would have coincided with moves to oust Minister Gordhan.
The attack on Treasury threatens to reverse important democratic gains made since 1994. In particular, post-apartheid South Africa has taken important steps to build an integrated state subject to a C onstitution and to parliamentary oversight. This process has frequently stalled and suffered setbacks, though today it is at major risk.
To understand why the National Treasury became the focal point of opposition we need to take a step back.
For some time now the department has been heavily criticised by two distinct groups. On the one hand, ultra-left academics, a term that someone like Patrick Bond claims for himself, have claimed that since 1996 the National Treasury has been the epicentre of neoliberal policy in SA. On the other hand is a complex of politicians and businesses that feel constrained by Treasury’s control of budgets and their oversight of tenders awarded, especially by state-owned enterprises.
For more than 20 years, some academics have lamented South Africa’s “elite transition”, arguing that the settlement in the 1990s consolidated the position of “white capital” as the ANC was converted to neoliberalism. In the case of universities, for example, Patrick Bond argues that the momentum towards free education, won through student-worker activism in the FeesMustFall movement in 2015, was stalled by austerity measures imposed by the National Treasury in 2016. Indeed, Bond suggests that the current finance minister, like others before him, is working against the public good by serving the interests of “fossil-intensive industries” and international financial markets instead.
There is often little point engaging such claims on the basis of their evidence or on the coherence of their arguments. For these are quasi-religious claims, which mark out those who disagree with them as blasphemers – or worse, as liberals. Consider just one, the claim about austerity. It is bunk.
The fact that the ANC is frequently unable to tell its own story should not detract from certain basic, verifiable facts. Since 2000 government non-interest spending has risen year on year, peaking in 2010 at more than 27% of GDP. Spending on “social protection” per capita, for example, more than doubled between 2000 and 2013, well above inflation. This was made possible by the impressive growth of government revenue – the dividend less of economic growth than of an effective tax authority, SARS.
Then came the economic crisis of 2008. The economy went into recession and tax receipts plummeted. Yet social spending did not plummet with it as the Treasury took countercyclical measures and as the South African government borrowed from local and international banks to cover the deficit.
There has not been austerity in social spending but, rather, in economic infrastructure. This explains why debt repayments are now the single largest item in the South African budget at almost 11% of GDP, followed by salaries for government employees and then social spending. What Nene was beginning to do before he was fired was to raise revenue (through higher taxes), lower expenditure (by curtailing the growth of government salaries) and bring spending by State-Owned Enterprises under control. I will come back to this in a moment – for it is the key to understanding the current situation.
Let us first consider expenditure trends in education in particular. The tertiary education system in South Africa includes 26 public universities, 50 TVET or FET colleges and over 3,000 community colleges or Adult Learning Centres. In 2014/2015 R76.3-billion was spent on this sector, that is, 2% of GDP. The universities received the lion’s share of moneys at R52.9-billion.
Between 2000 and 2013 government grants to universities dropped substantially, from 50% of their income at the turn of the millennium to only 40% now. Their reliance on student fees and donations and other third-stream income has therefore grown. This is not the full picture, however. During the same period government support for student fees increased dramatically, from 2% to 11% in 2013. NSFAS loans now account for about 40% of student fees. Taken together, government support to the sector actually rose modestly from 49% to 51% of overall revenue. Philippe Burger, an economist at Free State University, notes that the “real per-student subsidy has remained unchanged” over the last decade.
What has changed significantly is that the Department of Higher Education and Training encouraged massive increases in enrollments in universities and in colleges. For example, between 2010 and 2013 TVET colleges increased their intake from 360,000 to 640,000 students, a 70% increase. The growth in university enrollments was no less dramatic. Between 2000 and 2013 student numbers rose 80% from 560,000 to 980,000. The problem was that DHET encouraged such an expansion at a time when government revenue was falling and without modelling the cost implications.
As a bigger and bigger proportion of the government grant to universities has gone to subsidise student fees, so the money available to cover infrastructural and staff costs has declined. More students, however, require more classrooms and other infrastructure. University salaries have also increased during this period to bring them more into line with professional salaries in other sectors. This is what has placed pressure on universities to increase fees. The current crisis in education is more likely a result of policy failure than of neoliberal austerity.
Despite its poverty, the argument that Treasury is the vanguard of neoliberal austerity has become influential in parts of the student movement and among sympathetic academics. Kelly Gillespie, an otherwise excellent anthropologist, addressed an impassioned plea to Minister Gordhan to stop his “seismic betrayal” of students: “your department is structurally responsible for the violence that I witnessed on campus today”.
What matters, however, are the political consequences of these flawed arguments. They provide an ideological fig leaf to an anti-democratic assault on the state. Bond complains, for example, about the “ferocious liberal attacks on Zuma and his Gupta patronage allies”, suggesting that a more neoliberal, anti-poor agenda would result if Zuma was removed. In this Manichean world of opposites, the removal of Gordhan and the weakening of the National Treasury is cast as “progressive”. It is not.
One of the major democratic achievements of the transition was to integrate the Bantustans and myriad parallel administrations of the apartheid era into a common state. More precisely, the country’s finances were for the first time consolidated in a national department (National Treasury) subject to the constitutional framework and accountable to a) a democratically elected government and b) to Parliament. It is precisely this historic gain that is today under threat.
Despite much popular press, corruption by public servants and municipal officials as a percentage of GDP is not very high. The same cannot be said of corruption by the political class and in State-Owned Enterprises. Indeed, the fact that SOEs are largely exempt from public service regulations has made them highly lucrative avenues for an extremely self-righteous form of patronage.
The most basic attention to the governance of these institutions would reveal that many of their large, capital projects, including fossil-fuel ones, are financed off their own balance sheets – except when they need Treasury bailouts because of mismanagement. Many of the new revelations of “suspicious transactions” by Gupta-owned companies are related to Eskom deals. There are ongoing concerns about how Transnet, South African Airways (SAA) and other parastatals conduct their business. It is precisely the lack of transparency and accountability in the conduct of these businesses that the National Treasury has been trying to tackle.
During the 1990s progressive politics was served by left-oriented technocrats in government working to build effective state institutions. The results have been uneven, though in key ones, including in SARS and in the National Treasury, there were notable successes.
These democratic advances are now at risk from a political-business complex that seeks to destroy fiscal accountability, marginalise committed and honest bureaucrats and weaken state institutions. Such a regressive politics, which strikes at the very cohesion of South Africa’s fragile state and society, is given a fig leaf of progressive respectability by a today’s radicalism. It would be unfortunate if the FeesMustFall movement wittingly or unwittingly served this nihilism.