Opinion
South Africa: The removal of Finance Minister Nhlanhla Nene is bad news for the country
By Alan Hirsch
The fallout from President Jacob Zuma’s decision to dismiss South Africa’s respected Minister of Finance Nhlanhla Nene was felt immediately in the foreign currency markets where the South African rand suffered an immediate and dramatic fall.
The South African Treasury has been lauded as the best run department in the national government. What gave it that reputation?
Under the leadership of Trevor Manuel, the Treasury became not only the most outstanding government department in South Africa, but also a globally recognized high performer.
Manuel and his successive directors general, Maria Ramos and Lesetja Kganyago, and their successor Lungisa Fuzile, built an ethos of teamwork, hard work and recognition for performance. They also paid serious attention to transformation of the leadership of the institution. High performers understood that promotions within the organization were possible, and were a likely reward for outstanding performance. This led to a culture of the Treasury “growing its own timber” which further strengthened the new organizational culture.
Manuel and the director generals fiercely promoted and defended the organization and its members, building a culture of loyalty based on trust rather than fear. The result was an organization with high internal standards and a very high reputation with stakeholders. Its high reputation with stakeholders reinforced its pre-eminence in government.
Its reputation continued through to Nene.
Many developing countries suffer from poor fiscal management. South Africa appears to have broken the mould. Why and how?
It was absolutely critical for the minister to ensure that he had the full political backing from the president and other senior members of the executive. Manuel was able to obtain that. He was helped by the fact that he came into office at a time of debt crises in Latin America and poor macroeconomic performance in other parts of Africa which hammered home the need for strong central management of government finances.
The Treasury asserted full control over financial management. The implementation of the recommendations of the Katz Commission on tax policy were helpful too. It recommended that taxes should be simplified and that all taxes should go into a central revenue fund to be managed by the National Treasury.
The Treasury was further helped by the country’s constitution which tightly limits the fiscal power of provinces, and cities (though to a lesser extent), and prevents national parliament from writing the budget. The parliament was essentially able to accept or send back a budget, not to amend its details.
