PETER ATTARD MONTALTO: Maybe it’s time for a grown-up conversations about hard truths

Before the distraction of the 2022 ANC elective conference, there is a key window from now to the end of the year for these conversations to happen.

This column was first published in Business Day. 

So what — when all is said and done — is the point politically of successfully seeing the upholding of the constitutional order and former president Jacob Zuma jailed?

Are there not nettles to be grasped and sides to be chosen (and by implication people to be upset) to now advance the country? Isn’t a less risk-averse view needed of the shadows under the bed?

The problem of course has been that Cyril Ramaphosa’s presidency, until the reform dial started to quiver recently, has been defined by what he is not — not Zuma, not Ace Magashule, not anarchy, not state capture — more than for what it is. The convenient misnomer that somehow the dark forces of state capture have been blocking reform has therefore festered.

Yet Ramaphosa gained a supermajority in the NEC on the step-aside rule two months ago and has now navigated a serious potential cliff-related incident this past week. Arm-twisting  (or dislocation) on the issue of energy sector liberalisation was already achieved before this moment.

The truth was that Zuma was not there secretly scheming in Nkandla’s fire pool to block energy reform or spectrum auctions or a more modern and appropriate visa system, just as Magashule wasn’t either from the SG’s office.

The convenient excuses fall away now and the fruits of three years of “germination” must be seen. There is nothing left to be the anthesis of and only something to be for — an agenda, a vision of change.

Your political capital is not really higher, yet you have a renewed sense of goodwill at your back. While sentiment may not move somewhere more positive on Zuma in orange overalls, the removal of a yawning set of downside risks is not for naught.

Maybe it’s a time for grown-up conversations about hard truths.

That performative land reform through unnecessary Section 25 amendments can be allowed to die now that the EFF and ANC have reached an impasse in parliament. The death of the process — a two-thirds majority to amend it is beyond reach —is not a negative but a positive that reinforces property rights and investor sentiment and removes distraction from all the hard but obvious things the presidential advisory panel on land reform recommended.

Difficult conversations still need to be had on national health insurance (NHI). Everyone wants to see quality universal coverage, but what is currently proposed is not only wrong in that it won’t achieve its aims, it is also mad. Mad in the fallout risk it will create for private sector savings and quality and an open door to the kinds of corruption that found their way so easily into the head of the department of health during the Covid-19 crisis.

The most difficult conversation Ramaphosa needs to have with his cabinet colleagues is on fiscal policy.

The status quo has meant damaging and inefficient top-slicing of all projects as fiscal restraint is pushed down uniformly across the government (though particularly affecting provinces and municipalities), rather than tough choices being made on what programmes could be stopped or shifted to implementation or funding by the private sector.

The government should be choosing to do less, and better, itself, and then marshalling wider forces to pick up the slack elsewhere. This can give room for the government to concentrate its efforts on the poorest in society, laying the regulatory and process bedrock for private sector-led growth and support private-sector funding of infrastructure, housing, health and education.

Difficult conversations are needed to drive home the fact that most across the government still simply don’t understand the unsustainable macro-fiscal situation and don’t get the need to do expenditure and budgeting within a macro-funding constraint.

Part of this is down to the fact that the Treasury always says that fiscal policy is “laid out in the Budget Review”. Yet this is actually not true. In the budget speech and the review one gets little hints and a multitude of priorities and implicit targets — we can try to guess what fiscal policy is, but it is  never actually described.

The markets know this and with it the inconsistency of meeting targets over time and the problems divining a reaction function of what this current uncertain policy will do with the terms of a trade boon we are having now.

As such, difficult conversations on fiscal policy should result in a white paper published not by the Treasury but by the cabinet as a whole and which will then form part of ministerial contracts for monitoring and evaluation. This would start to push down the zero-based budgeting mindset in a far better way than the slow and uncertain progression of that process now just starting.

A different sort of dialogue on fiscal policy in cabinet would mean that we could have a more open and frank debate on the additional R50bn or so in mining corporate tax and royalty receipts that the Treasury will receive this year. There is a need to spend some of it on Covid grants and a package of deployable, credible measures for each Covid wave. What is also required is to cut bond issuance now and then save some of the receipts to cover government bond redemption risks in the coming two years that will help flatten the yield curve and allow banks and investors to support the recovery rather than buying government bonds.

Grown-up conversations require time and effort but also firm views of the president’s own to bring to the table with the right advice behind him. As the distraction of recent events falls away, and before the distraction of the 2022 ANC elective conference opens up, there is a key window from now until the end of the year for these conversations to happen.

Will the president seize the moment or remain concerned by the shadows under the bed?

• Attard Montalto is head of capital markets research at Intellidex, an SA research-led consulting company.