IN HIS medium-term budget policy statement on Wednesday, Finance Minister Nhlanhla Nene outlined bold plans to consolidate SA’s public finances. His proposed debt stabilisation plan, however, faces complex challenges.

First, the reduction of the 2014 budget expenditure ceiling by R25-billion over the next two years is likely to have unintended consequences. The Treasury observed that "all government departments and agencies" need to reduce inefficiency and waste "and minimise the impact on front-line service delivery", but senior public sector managers will enjoy wide discretion over how cuts are achieved.

Initiatives to strengthen the public service are being unrolled, including a ban on public servants doing business with the state, a government school, a central disciplinary tribunal, and a partial centralisation of procurement. But this reform process will take more than a decade of application to yield dividends — and it requires investment. Cost-cutting now may bring perverse consequences, and affect front-line services and specialist skills more than waste and nonessential items.

The freezing of the public sector personnel headcount and a review of a public sector wage bill estimated at R439-billion for 2014-15 will meet stiff resistance from public sector unions.

Second, Nene expressed the hope that a tax policy "adjustment" due in the 2015 budget will generate "at least" R12-billion in 2015-16, R15-billion in 2016-17 and R17-billion in 2017-18. This will be hard to achieve given already high tax rates.

Third, the proposed "deficit-neutral" approach to financing state-owned enterprises seems politically fanciful when each of the individual cases of parastatal special pleading is examined.

Finally, the symbolic programme of belt-tightening for public servants introduced by Nene’s predecessor, Pravin Gordhan, has already been undermined by President Jacob Zuma’s lavish country estate improvements and by his taste for expensive Russian nuclear technologies.

Second, Nene expressed the hope that a tax policy "adjustment" due in the 2015 budget will generate "at least" R12-billion in 2015-16, R15-billion in 2016-17 and R17-billion in 2017-18. This will be hard to achieve given already high tax rates.

But Nene does have certain strengths.

Given his recent appointment, it is virtually impossible for Zuma to fire him. Nene said on SAfm on Thursday morning that nuclear power was not mentioned in his budget documents because "it has not been brought into government processes for engagement". These are not the words of a yes-man.

Nene is also more experienced than his professional politician predecessors. He has been a shop steward, a councillor, and a manager in an insurance company. His political home is the ANC’s Bambatha region in KwaZulu-Natal, where he has been a longstanding regional executive committee member. This region has a valuable historical lesson to teach any finance minister contemplating tax increases and the imposition of stricter public sector procurement regulations.

It is named after Chief Bambatha kaMancinza, head of a Zulu clan that lived in the Mpanza Valley in the Greytown district in the late 19th century. For two decades after Zululand’s 1887 annexation by the colony of Natal, white farmers steadily appropriated arable land to establish sugar plantations. Local people were laid low by natural disasters, an epidemic of East Coast cattle fever, and finally by a swarm of locusts. This immense suffering was borne stoically. Then the Natal government imposed a poll tax of £1 on all men over 18 years of age. This tax, due for payment on January 1 1906, was intended to force African men to work for cash in the fields.

Bambatha and others hid in the Nkandla Forest and launched attacks against the colonial forces. This campaign, which became known as the Bambatha Rebellion, culminated in a heroic defeat at the hands of the colonial forces at Mome Gorge. The rebellion became an inspiration for political activists. It is one of many streams of SA’s history that feed into a broad animosity towards the imposition of state authority.

One of Nene’s key challenges will be to build a culture of regulatory compliance within the state, and to maintain the state’s legitimacy among citizens when the tax system begins, as it must, to make deeper demands upon them.

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