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One of the crucial signals emanating from yesterday's Medium Term Budget Policy Statement (MTBPS) is that the National Treasury will not bend to pressure from Cosatu. Minister Gordhan has categorically slammed the economic door shut in the left's face. Earlier this year, Cosatu made a list of claims for dramatic changes to economic policy at their annual conference. These included:
• "The whole food supply chain should be nationalised"
• "Property clause in the Constitution should be reversed"
• "Import controls with taxes and quotas"
• Disbanding of all private security prisons
• "Take immediate steps to nationalise the public transport system"
• Change public holidays into non-trading public holidays - i.e. all shops must close on these days
• "Re-nationalise SASOL along with other strategic companies such as Arcelor Mittal, Denel, Telkom, Eskom, SARB"
• "Outlaw import parity pricing in South Africa"
• "Reverse the commercialisation of Eskom"
• "Scrap inflation targeting"
• "Move towards a 100% state owned Reserve Bank"
• "Reinstatement of exchange controls"
• "Lower the Repo rate by a minimum of 5%"
• "Moratorium on retrenchments"
• "Moratorium on foreclosures (evictions)"
Needless to say, none of these measures could be introduced without doing immeasurable harm to the economy. Clearly, the message sent out by Gordhan roundly rejects these demands. If anything, his insistence on reducing "unnecessary and wasteful expenditure" and the need for "sustainability" of finances all adds up to his point that the country needs to move beyond the old debate on whether the economy should be controlled by the state. The DA welcomes this view -- pragmatism and goal orientated polices for economic growth are needed in South Africa, not the socialist, centralising thinking of the left. This fact has been partly lost as a consequence of the myriad of information that is contained in the MTBPS - the array of statistics tend to drown out the more fundamental question on policy direction, even though that matter requires the closest attention. The stance taken by Minister of Finance, Pravin Gordhan is significant - government has been under increasing pressure from Cosatu to radically change macroeconomic policy. The departure of Joel Netshitenzhe from the presidency suggested a shift to the left and came against a background in which Ebrahim Patel and Trevor Manuel have been battling for control of macroeconomic policy. This is a welcome point of clarity, that the left has no real influence on the Minister of Finance. It is also welcome that two key points from Mr. Gordhan's speech agreed with proposals mooted two days ago at the DA-COPE joint press conference. These were:
• Trimming government assistance to State Owned Entities (SOEs); and
• Re-evaluating public sector jobs that are not adding value
However, the combined financial assistance of R 1 392 million to SOEs, together with the additional expenditure of R 589 million on the creation of new government departments, suggest that there is still a lot more that can be done to cut wastage. It remains to be seen how vigilant the Treasury will be over the huge funds thrown at SOEs, and whether the Treasury has the political will to do the right thing if these SOEs are still not performing on their mandates at the time of the 2010 Budget in February next year.