The battle for the political narrative – Pravin Gordhan is a statist socialist, not South Africa’s market friendly saviour

The battle to control the South African political narrative has reached fever pitch as various special interests try and sway popular opinion. A comment from the new South African police commissioner Fikile “Mr. Razmataz” Mbalula caught my eye this weekend as he tried to paint former Finance Minister Gordhan as an enemy of “the people” and score a populist political point in favour of the troubled ANC hierarchy. Mxolisi Mngadi from Fin24 paraphrases, “Former finance minister Pravin Gordhan is not a hero of ‘our people’ but a hero of fat cats and capitalists, ANC NEC member Fikile Mbalula said on Friday.”

While Mbalula’s comments are easily dismissed because he is a well-known ANC pit-bull with low levels of credibility outside of the party, it’s critical to hone in on this point because it highlights a critical lack of analytical nuance in South Africa’s political discourse. Pravin Gordhan is labeled as “market friendly” merely because he deals with financial markets. This conclusion couldn’t be further from the truth and the misinterpretation has led to an unfortunate capture of the economic narrative, which is very detrimental to South Africa’s economic future.

By many metrics Gordhan oversaw a incredible growth in the South Africa government in his first stint as Finance Minister (May 2009 – May 2014) and the trend continued after he was replaced by Nhlanhla Nene. Government spending as a % of GDP rose from below 28% to 32%, central government debt (excluding parastatals and municipalities) as a % of GDP rose from 26% to 50% and the public sector wage bill expanded sharply. Added to this Gordhan oversaw numerous bailouts to South Africa’s bloated State Owned Enterprises: SAA, Eskom, etc. In order to pay for this gargantuan growth in government, tax rates have meandered steadily higher. The government’s increasing desire for maximum control oversaw an enlargement in regulation further constraining the private sector.  This is not the hallmark of a market friendly policymaker. It clearly shows Gordhan’s true stripes as a big government apparatchik – he is a card carrying SACP member after all.

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Many have applauded Gordhan’s efforts to defy the global credit rating agencies over the past 18 months. I can understand why. Gordhan is a skilled technocrat who is trained in the dark art of the Treasury finances. He understands global credit rating agencies, can communicate with them clearly and was well placed to conduct the trench warfare against the junk status downgrade. He was certainly a better candidate for this thankless task than Des van Rooyen or Malusi Gigaba.

However just because Gordhan was fighting this fight with gusto doesn’t mean that he’s market-friendly and it certainly doesn’t mean that he’s been working in the South Africa’s best interests all these years. Supporting this narrative is also deeply problematic. It’s like picking pennies up in front of a steam roller! The big government policies that Gordhan stands for are exactly the reason the South African economy has been brought to its knees. The sooner we realise this and stop worrying about each incremental credit rating the quicker we’ll set South Africa on a better course.

Government control in basic education, electricity, roads, railroads and numerous other infrastructure projects has led to crisis after crisis in the economy. These departments are not going to get more efficient by themselves.  The best driver of efficiency is the free market where resources are priced as they should be, scarcely, and where good performance is rewarded on merit. This limited government goal is clearly not what Gordhan was trying to create! Big government projects with large lucrative contracts also create much greater chance of looting and corruption. The only way to tackle this is through smaller government that doesn’t place tenders and procurement as the best get rich schemes in the country.

 

Pravin Gordhan is currently being put on a pedestal as a national hero because he stands as a rare political backstop against the unhinged corruption of President Jacob Zuma and his crony clique. I can understand this. However he is certainly not a free-market politician. It is also dangerous to put people on a pedestal when they are being compared relative to something that is perceived to be worse (Zuma’s corruption). This relative comparison reminds me of the months before Zuma came into power of the ANC. Zuma was put on a pedestal because he wasn’t Thabo Mbeki. We’ve learnt the dangers of that narrative. Unbridled growth in the South African government by communist leaning Finance Ministers is potentially just as dangerous.

What can we do? In the interest of keeping this post brief, I’ll try and answer this question in more depth in the future. In short, a more nuanced and deeply analytical perspective is required. It’s particularly important to appreciate the battle of ideas that’s taking place, to understand the different perspectives properly, to question the political narrative espoused in the media and to wade into the debate. We need to forge a productive path forward – government expansion is not the answer.


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