Nene, Pravin and the Fees Must Fall

Demands for a 0% fee increase for higher learning are back on the cards. The Matrix advises we keep an eye on Finance Minister Pravin Gordhan….

Latest developments regarding higher education fees prompt a revisit of the Treasury drama that unfolded towards the end of 2015. President Jacob Zuma has reportedly ordered ministers Pravin Gordhan and Blade Nzimande to find the money required to fund another 0% fee increase for higher education institutions. This would be a second year running where these institutions do not increase fees. Threats of collapse of these institutions were already loud when students went on a national shutdown as a form of protest against fees. Fee-free education has been on the agenda within the department of higher education for a number of years. A number of models have been presented to Treasury as part of the work that the state is doing to find solution to this issue.

December 2015 saw South Africa visited upon by a symphony of voices harping out loud in outrage.  A finance minister had been replaced. A couple of hundreds of billion rands were reported to have fled our shores through a large sell-off in the stock market. Moreover, our hyperactive currency took a nosedive.

Many reasons have been given over why markets reacted the way they did. Stories of state capture continue to proliferate the discourse accompanied by chronic individualisation of socioeconomic issues. As has become the norm, solutions to South Africa’s problems lie in dealing with people rather than problems themselves. Take the removal of then Finance Minister Nhlanhla Nene for example. The removal of an individual, Nene became far too

 

important to the markets than the institution he led causing an apocalyptic outrage. Subsequently, another individual, Gordhan, became far too important for the well-being of our economy to be “harassed” with threats of legal action against him for some of the things he allegedly did while SARS commissioner. Anyway, reasons for Nene’s removal went from an allegedly dodgy SAA aircraft deal to another allegedly dodgy nuclear deal, which by the way, happens to be in line with the ruling party’s policies on energy. Both the NDP and elective conferences of the ANC speak of an energy mix, of which nuclear is a part. But that is another piece on it’s own.

To date, Zuma is yet to articulate, unambiguously, his reasons for Nene’s removal. Let’s explore possible reasons that have either been ignored or leaked unwittingly by some of the harshest critics of the President and the ANC at large.

Fees: University students undertook a momentous exercise of, rightfully, calling the democratic government to deliver on it’s promise of free quality education. On 21 October 2015, they stormed Parliament demanding that fees fall, as Nene was about to deliver the medium term budget. Nene declined the invitation to provide the resources to address the financial needs. He said there was no money for fees, pointing to the significant increases that fees had enjoyed from recent budgets. In response, DA leader Mmusi Maimane had this to say: “In an astounding failure of leadership on the part of the government, today, Minister Nene failed to address the funding crisis in his budget, offering no relief to students”.

 

Two days later, the President did act. He acceded to student demands and agreed to fund the 0% fee increase. This is one example where the President and the Minister appeared misaligned on a very serious political issue. Curiously, a week later Maimane said that the DA would be calling for the amendment of the medium term budget, to accommodate student funding needs. After Nene’s removal the same Maimane was not pleased, stating that “Nene had fiscal discipline”. I use Maimane’s inconsistent reactions to the fees and Nene’s removal to illustrate the problems that come with individualisation of issues in SA.

Exchange Rate: Between Zuma’s inauguration as president of the republic and the 2015 budget speech delivered by Nene, the rand had depreciated over 100%. The President made sure to mention this fact of a weakening currency when quizzed in Parliament in March 2016. The rand’s regressive rally commenced with Gordhan’s first term as finance minister and continued under Nene’s leadership. Gordhan was Nene’s predecessor and was reappointed late last year.

The hard data is that the rand has performed very poorly. We may attribute such performance to the volatile currency markets, which would be in conflict with the outrage of December 2015 since that suggested that currencies do not weaken/strengthen just because it is the nature of the markets, but that they do so because of strong/weak policy. If we attribute rand weakness to policy, then the head of treasury has to take responsibility of the rand’s poor performance. If we attribute the weakness to markets, then we have to absolve President Zuma of responsibility over the December fiasco. But that’s another topic altogether. Let us go with the assumption that policy positions are responsible for performance of a currency. Nene was appointed in May 2014. In April 2015, he announced significant relaxation of exchange controls. South African citizens were allowed to move more than  double the amount they wished out of the country. Where individuals used to be able to move R4m out of SA, they could now take R10m out of the country. We will one day explore some of the contradictions inherent in the arguments made for such moves. Exchange controls make it easier/harder for capital inflow/outflow. Given the ease with which money can be moved out of SA, thanks to Nene’s relaxation of exchange controls, it is no wonder that the rand is so vulnerable to sneeze-fests.

Given both reasons, it will be interesting to see how the relationship between the president and the current minister of finance works out in the coming months. More interesting however, is whether or not the 0 fee increase is implemented.  The President is said to have ordered the Minister to find the money. Capital outflows as encouraged by the relaxation of exchange controls during Nene’s tenure are the last thing the country can afford at a time when Treasury says there is no money to fund free higher education. On that note, it would be a worthwhile exercise to keep an eye on the next budget speeches to understand the levers that influence whether or not a finance minister gets reshuffled. The tragedy is in the simplistic supposition that a nuclear deal or people’s alleged girlfriends influence reshuffles. There are more important policy considerations that go missed amidst the noise.

The Maytrix can be found on Twitter @themaytrix23

2 Comments on "Nene, Pravin and the Fees Must Fall"

  1. Brilliant, enlightening article.

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