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Provincial elites use Zuma as Trojan horse to hit Treasury by Ivor Chipkin, Joel Pearson and Sarita Pillay (BDLive), 17 December 2015

18 December 2015

President Jacob Zuma listens to the state of the nation debate in Parliament. Picture: GCIS

AFTER Nhlanhla Nene was fired, cyber and print commentary, searching for an explanation, grasped at several terms: state capture, cronyism, patronage. The essence of the argument is that President Jacob Zuma’s actions were motivated by self-interest and the interests of family, friends and associates.

Then on Sunday, there was a reversal. Zuma was forced to replace his appointment — Desmond van Rooyen, a rank Treasury outsider — with Pravin Gordhan, a former finance minister and South African Revenue Service commissioner, a true insider. Zuma faced an unprecedented revolt — from the markets, public opinion and even figures within the African National Congress (ANC). It is unlikely he and his administration will recover. The Polokwane moment is drawing to an ignoble end.

There is a deeper significance to these events, however. What we saw in Nene’s removal was the flexing of provincial and regional powers against the central state. What we saw on Sunday was that the established hierarchy of the state cannot be easily overturned, even by the president.

The ANC came to power with an ambitious redistribution-and-development agenda. It is well-known that it entered office amid an economic crisis that left the national coffers empty and the country heavily indebted. Less well-known is that the remaining resources were spread across an array of homeland governments and administrations, many with their own treasuries. To begin to spend according to a development agenda, there would have to be consolidation of government revenue and a co-ordination of government expenditure in a genuinely national treasury.

Democracy brought watershed changes in the governing structures of the country. In place of the multiple administrative centres of SA’s apartheid-era political geography, a "unitary, but decentralised" government system was introduced. Nine new provinces replaced the existing four, and the ostensibly independent bantustans and self-governing territories were reabsorbed.

The democratic constitution set out a road map to transform the fiscal structures of the country. Most crucially, section 216 outlined the need to establish a centralised national Treasury that would perform a co-ordinating role in the emerging intergovernmental system.

Apart from the Presidency, the Treasury is the only government department specifically mentioned in the 1996 Constitution, underscoring its importance in the new government landscape.

The new Treasury was formally established in 2000 after the passage of the Public Finance Management Act, which merged the departments of finance and state expenditure. To it would fall the task of developing and managing a new fiscal system premised on an intergovernmental model of "co-operative governance". In practice, this meant line departments and Parliament would cede ultimate control over state expenditure to the Treasury.

It is most regrettable that many of these developments have been simply dismissed as "neoliberal" reforms reflecting the ANC’s surrender to the Washington consensus. In fact, they were the institutional reforms necessary for building a national state.

What about provincial governments, the bastard children of the transition? Nine new provincial administrations had emerged to give form to the "unitary, but decentralised" democratic state. Each province has its own treasury that receives transfers from the central government, as mandated by the Constitution. While the national Treasury is seen to play a crucial role of guidance and oversight, imposing expectations of frequent reporting on expenditure, it is not meant to dictate exactly how provincial treasuries draw up their budgets.

The Treasury is, nonetheless, mandated to play a key role in co-ordinating fiscal relations between the different spheres of government, and, as former finance minister Trevor Manuel once explained, this required measures to build trust and political buy-in. The establishment of other intergovernmental forums, such as the Budget Council in 1996, alongside the Fiscal and Financial Commission, a constitutionally mandated structure that fulfils an advisory role with respect to intergovernmental transfers, further strengthened the drive towards open budgeting.

While establishing mechanisms for broader input into the budgeting process, the Treasury’s influence in reshaping and managing post-apartheid structures of governance remained predominant.

This kind of hierarchical co-ordination was emblematic of former president Thabo Mbeki’s approach to state-building: a "vanguardist" project in which change was to be driven from an increasingly powerful central government.

In the 1990s and into the new millennium, the Presidency and the Treasury carried the flag of central-state building. In the process, however, the influence of regional and provincial power brokers was undermined. The whiff of authoritarianism stirred discontent across party structures. The relative authority of the ANC in the state was threatened by Mbeki, and his overthrow is frequently analysed as Luthuli House fighting back.

But something else was going on as well. Coalescing around provincial governments were all sorts of regional forces — ANC members who did not make it into national government, aspirant business groups, old bantustan elites and bureaucrats, and in some cases, traditional authorities and ethnic associations. This is what the so-called Premier League in the ANC is, an expression of powerful regional and often rural interests. They are supported by actors in the state-owned enterprises seeking greater autonomy for financial and investment decisions. The current saga at South African Airways is a case in point. In Zuma, they have found a Trojan horse.

Their biggest obstacle is the Treasury and its hierarchical and centralised control of the fiscus. Among Van Rooyen’s first utterances as finance minister was a lament about the "inaccessibility" of this institution.

Note his words: "We want to demystify some of the myths that are currently prevailing around the functionality of this important department, the National Treasury. Because in our take, National Treasury is the axis of our development agenda. It must be accessible."

In the firing of Nene and his replacement by a Treasury outsider, we witnessed emboldened regional and rurally based coalitions, as well as forces in the parastatals, oppose the institutional foundations of a national state. The reversal of this decision shows the Treasury’s centrality within the state apparatus — and the discipline it embodies — is supported by a range of forces more powerful than the president.

• Ivor Chipkin is the director of the Public Affairs Research Institute. Joel Pearson and Sarita Pillay are researchers at the institute. A study of the emergence of the national Treasury will shortly be available