New minister of finance Malusi Gigaba took a conciliatory tone at his first press conference on Saturday, pleading with “sceptical” members of the media, opposition and the public to judge him on his actions in the coming months and not “speculation and rumours”.
Gigaba was accompanied by his new deputy Sfiso Buthelezi, and long serving director general in the treasury, Lungisa Fuzile.
Amid his reassurances that fiscal policy would “stay the course” as approved by government, Gigaba also said that he would not be withdrawing from the various court cases between the controversial Gupta family and the National Treasury.
“The issues that are before the courts are going to remain before the courts,” Gigaba said
“I don’t think it is my responsibility right now to take any decision either to withdraw cases or plead differently in cases that have been lodged against us”
How Gigaba aims to handle these matters is seen as a key first test for his tenure as finance minister, after the tumultuous sacking of his predecessor Pravin Gordhan. While numerous cabinet ministers were axed, it is the changes at the finance ministry that have caused a national outcry.
The reshuffle wiped a reported R86-billion off the market capitalisation of the country’s banks, and sent the rand plummeting.
Gordhan, along with his deputy Mcebisi Jonas, and the administration at treasury have been seen as guardians of the public purse and bulwarks against state capture.
Their purging has been interpreted by analysts as an all out assault on the treasury and its tight reign on state spending.
Gigaba now faces the unenviable task of being seen to effect the ANC’s commitment to “radical economic transformation” without undermining Gordhan’s careful commitment to ensuring government finances remain on a sustainable path.
Other tests facing Gigaba include how he handles the executive’s push towards nuclear procurement, as well as the treasury’s unwillingness to regularise an joint venture by state owned arms firm Denel, with the Gupta linked VR Laser Asia.
He is also now in the front line of the Gupta’s battles with South Africa’s financial institutions.
The family’s commercial interests have been under threat since the country’s four largest banks closed down their accounts.
Among the recent court battles that Treasury has been drawn into is the bid by Vardospan, which is part owned by Gupta business associate Salim Essa, to buy Habib Overseas Bank.
The purchase is seen as a last ditch attempt by the family to secure banking services as other channels steadily dry up.
Vardospan brought an urgent application to the high court this week, to force the South African Reserve Bank and the finance minister to grant it a banking license and allow its purchase of Habib Overseas Bank go ahead. But it was dealt a blow when the court ruled that the case was not urgent.
Nevertheless, should Vardospan still pursue the acquisition of Habib, they will still need the banking license from the banking regulator.
Although Gigaba has served as both home affairs minister and the minister of public enterprises, his appointment to finance minister in the wake of the purge of performing ministers has led to questions about his credibility.
Following the reshuffle the Economic Freedom Fighters swiftly labelled Gigaba, a “Gupta stooge”, accusing him of being bankrolled by the family.
Gigaba said in response that he would not comment on “gossip, rumour and innuendo” adding that “my lawyers are going to deal with that”.
Gigaba committed to government’s efforts of implementing “radical economic transformation” but doing so within the “fiscal constraints and fiscal ceiling we have set ourselves”
There has been a perception around Treasury that it belonged to orthodox economist, big business, international investors and other powerful interests.
But he said it would be a mistake to “personalise the policy of the treasury” which was set by government as a whole and “agreed to by cabinet as a collective”
He committed to working to maintain an investment grade rating, as this was important to ensure South Africa’s access to capital at fair and manageable interest rates. But he qualified this adding that:
“Whilst we accept that states justifiably incur the scrutiny of ratings agencies and investors when they borrow, we trust and hopes that this scrutiny will not preclude our ability [to] creatively and still within our means to pursue progressive policies to achieve our development objectives”
He had already had ‘cordial but robust’ discussions with Fitch and Moody’s but and would be speaking Standard and Poor’s in the coming two days he added.
Three members of the ANC’s top six – Gwede Mantashe, Cyril Ramaphosa and Zweli Mkhize – have all expressed misgivings about the reshuffle, but said Gigaba they had raised concerns about the process, rather than the choices of the new ministers.
In terms of nuclear procurement Gigaba said the state remained committed to procurement as a pace and scale that the state could afford.
But it was left to Fuzile to clarify questions over what “the pace and scale” actually meant
He likened it to the desire to buy a Bentley, but realising you can only purchase a Toyota:
“We can only buy it at a pace and scale we can afford, it is only logical,” he said, adding that a range of factors needed to be considered. They included the size of GDP, the revenues that the economy can generate, the size of Eskom’s balance sheet, the amount of debt that its balance sheet is carrying, and the guarantees that the state had already given it.
Although Eskom had been designated the procurer of nuclear energy, it was wholly owned by the sovereign he added.
Eskom borrowed largely off the back of state guarantees so affordability of nuclear could not be “independently determined by Eskom alone”.
“If they were to overcommit themselves and they were to become unable to service that debt it becomes government’s business,” he said.