South Africa’s new finance minister, Malusi Gigaba, signalled a swing to the left on Saturday, saying “we need to radically transform the South African economy” while pledging to maintain fiscal stability.
Gigaba also said during a televised news conference that he was committed to protecting South Africa’s cherished investment-grade credit ratings, which analysts have said are threatened after the removal of his predecessor Pravin Gordhan.
Radical economic change in the political language of South Africa’s ruling African National Congress (ANC) means the redistribution of wealth, land and opportunity to the black majority.
“The ownership of wealth and assets remains concentrated in the hands of a small part of the population. This must change,” Gigaba said.
ANC administrations since Nelson Mandela’s in 1994 have promised to spread prosperity and the government has made strides, including the construction of 4.5 million housing units for the poor and the erection of a social welfare system that puts food on the tables of the most vulnerable.
But South Africa remains one of the world’s most unequal societies, riven by glaring income disparities, an official jobless rate of 26.5 percent, and widespread poverty. The economy is barely growing and inflation threatens to reignite.
President Jacob Zuma, who faces a growing backlash from within his own party after electoral setbacks and missteps that included a fiasco that threatened the payment of social grants to 17 million, has taken a more populist tone on the economy.
Zuma on Saturday spoke about “our stated commitment to advance radical socio-economic transformation” at the launch of a housing project in his home province of KwaZulu Natal.
Zuma has also recently said he wants to change the constitution to expropriate farmland, which remains mostly in white hands, without paying compensation to the owners, raising fears of the land grabs that wrecked Zimbabwe’s economy.
Analysts have said such populism is aimed at the ANC’s rural political base.
POLITICAL CHALLENGES
Such an agenda could face challenges from more moderate elements in the broad tent that is the ANC, and ratings downgrades would significantly raise the government’s borrowing costs, restricting its ability to pursue radical policies.
Gigaba acknowledged the political challenges he faces. Zuma’s sacking of the widely-respected Gordhan shook South African markets on Friday, undermining his authority and threatening to split the ANC.
“I am fully aware that we are at a highly politicised, polarised and contentious moment in the history of our young democracy,” Gigaba, previously Home Affairs minister, said.
Gordhan’s midnight sacking capped a dramatic week that saw him and his deputy – who was also fired – recalled from an investor roadshow in London.
It was also the culmination of months of sparring between Zuma and Gordhan which analysts and local media have said is rooted in the president’s desire to get more control over the Treasury, which has a world-class reputation for its transparency and expertise.
Gigaba pointedly said fiscal policy would not be done simply in the interests of big business and capital.
“For too long, there has been a narrative or perception around Treasury, that it belongs primarily and exclusively to ‘orthodox’ economists, big business, powerful interests and international investors. With respect, this is a people’s government,” he said.
