I believe fundamentally that leadership in all walks of life is a key determinant of success. In this regard I recently called publicly for President Ramaphosa to show clear leadership in his State of the Nation Address and while the narrative was all there in his speech, it remains to be seen whether this translates into effective leadership. But while leadership tends to grab all the headlines (reference Andre De Ruyter and Eskom), too little attention is paid to the less glamorous and sensational (boring?) issue of institutions in public life.
In South Africa, quite understandably, we tend to default to the halcyon days of the Mandela leadership and presidency. Having been privileged to meet Madiba, I can attest to his personal charisma, powerful personality and his steely determination to change our country for the better. But Mandela is a one-off. He was a unique phenomenon, the likes of which the world is never likely to see again. To be sure, we will still witness great leadership. Indeed, this is what we are seeing in the unlikely form of Ukrainian President Volodymir Zelensky today, on the anniversary of the Russian invasion. But leadership, no matter how transformative and inspiring, will count for little in the absence of robust institutions.
So, it was with these thoughts in mind that I reflected on this year’s national budget delivered by Finance Minister, Enoch Godongwana, this week. In many respects Godongwana is an unlikely holder of the nation’s purse strings. This is not to question his technical or financial ability as he earned an MSc in Financial Economics at London University. More particularly, Godongwana is a former trade union leader, having served as the General Secretary of the National Union of Metalworkers, as well as on the COSATU National Executive and Central Committees in the 1990s. He also served as a Deputy Minister for some time in the government of President Zuma.
Yet, aside from his ideological leanings, a major concern surrounding Godongwana’s appointment to Treasury was the fallout from Canyon Springs Investments 12 debacle of which he jointly owned 50% with his wife. The company was accused of defrauding clothing and textile workers of their pension monies over a four-year period, the revelations of which led to his resignation from Zuma’s government. Hardly a stellar CV then and far from a ringing endorsement for a Minister of Finance of a large, diverse and developing country!
And yet, Godongwana tabled a 2023 budget that was sober, pragmatic, clear, decisive, balanced and delivered with the confidence of a Minister on top of his brief. It is to Treasury’s credit, with support from SARS and indeed the compliant personal and corporate tax base, that it delivered a main budget primary surplus for the first time since 2008/09. I can think of many developed countries that could only dream of being in this enviable position. Without delving into the minutia, Treasury’s decision to ease Eskom’s balance sheet to allow the power utility to re-engineer itself was decisive and allows the ailing state owned enterprises to restructure for longer term sustainability. This is in the national interest once we come through this short term pain. Of course, there are no free lunches and the consequence of Treasury’s relief package to Eskom is to deepen overall debt to GDP ratios and to push out by a few years the stabilisation of this ratio. Nonetheless, these short-term measures are justified, not least to provide a boost to flagging domestic economic growth.
But the most encouraging indicator emerging from the former Trade Union leader’s budget speech was the commitment to keep the growth in government spending at 2,9%, way below the current and forecast inflation rate. This fiscal discipline will be severely tested by public sector workers in particular, however, not to mention other government departments and will be a personal test of Godongwana’s leadership.
But the real winner of budget 2023 was Treasury as an institution. In recent years the Ministry has been headed by communists, socialists, social democrats, accused Gupta captives and even a week-end special. Yet, despite such ribald leadership, Treasury as an institution delivers on its national mandate, year-after-year, without fear or favour. While perhaps not fully appreciated locally, the Global Open Budget Index Survey has awarded South Africa top spot (second place in 2021) for which we can all be proud.
Good leadership is vitally important, but can only succeed when institutions are strong.
The website you are about to enter is not intended to be accessed or utilised, in any way, by the general public or by retail investors. This site is aimed specifically at professional investors and intermediaries, that being those who are duly authorised to access such information in the countries in which they are themselves resident or domiciled.