South Africa’s Finance Minister Trevor Manuel on Africa’s COVID-19 Response
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- Authors: ANALISA R BALA
- Published: June 1, 2021
Fiscal reforms and governance during Manuel’s tenure
- Implemented a revamped budgeting process and set a stringent deficit reduction target.
- Introduced technical committees in the Treasury to invite other departments to explain spending needs.
- Introduced a medium-term expenditure framework to improve planning.
- Instituted a practice of tabling a budget policy statement months in advance of budget day to set the size of the spending envelope in line with government priorities.
- Outcome by 2006: the economy was growing at its fastest pace in more than two decades, and the budget deficit was close to zero.
- Reflection: “Part of leadership … you must not be afraid to take a stand on some issues if you are on solid ground.”
Regression during the decade under Jacob Zuma and institutional weakening
- Assertion that the decade under Jacob Zuma “wasn’t just ‘lost’ as though everything was static. We regressed.”
- Treasury was considered too powerful and was weakened by presidential attempts to dismantle it.
- Consequences cited: weakened ability to collect taxes, destroyed overall allocative efficiency, and extensive corruption.
- Political continuity noted: “It may be the same party in power, but it’s a very different country.”
Constraints from public sector pay and ideology
- Observation: “Probably 60 percent of members of the trade union federation, COSATU, are public servants.”
- Comparison: public servants in South Africa do relatively well at PPP averages, which “takes state resources off the table.”
- Institutional culture matters: esprit de corps among Treasury staff previously drove delivery despite modest pay.
- Warning: “Ideological purity is the biggest retardant to transformation in South Africa.”
Inequality, social wage, and human capital
- Emphasis that a functional social safety net is “of paramount importance—it’s very broken in South Africa.”
- Broad conception of “social wage”: beyond unemployment benefits to include welfare targeting, quality of education and health care, and access to clean water, sanitation, and refuse collection.
- Example highlighting human potential amid adversity: a high school student from an informal settlement called Kosovo graduated with 99 percent for mathematics and 100 percent for physics while living amid extreme violence.
- Policy implication: addressing equality requires changing the living environment and strengthening social capital through empowering education systems.
Africa’s COVID-19 financing gap and recommended global response
- Estimate: a funding gap of about $100 billion annually over the next three years for Africa’s pandemic response.
- Initial response mechanism: Debt Service Suspension Initiative (DSSI) was created with IMF and G20 engagement.
- DSSI performance: “Of the more than $12 billion that was to be deferred, only about $5 billion has been released.”
- Call for new global action:
- Need for a new SDR allocation.
- Need for discussion on ways to deploy unused SDRs to boost liquidity for low-income and struggling middle-income countries.
- Historical precedent cited: after Lehman Brothers collapse, the G20 convened at heads-of-state level in October 2008 and by April 2009 a proposal for an SDR allocation was agreed—used as a model for the quality of leadership required today.
Debt relief considerations and market access trade-offs
- Reflection on past debt relief: reference to the joint IMF–World Bank debt relief initiative launched in 1996 and mixed outcomes.
- Current challenge: more developing countries now have access to capital markets; some countries “desperately need debt relief but are afraid that once they apply, their credit rating will be downgraded—it’s a Catch-22.”
- Recommendation: at some point, discussions on debt reduction will be necessary, analogous to past initiatives.
Leadership, accountability, and people-centered governance
- Constitutional context: Cabinet members are accountable collectively and individually to Parliament; the budget represents that collective responsibility.
- Manuel’s leadership approach: persuading Cabinet to reduce the debt-to-GDP ratio and designing systems “to compel us to live within our means.”
- Personal motivation and public communication: grounding policy in people’s understanding—“I can talk ‘economics,’ but what does it matter unless people whose lives are affected understand what it means for them?”
Content in this bundle
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- South Africa’s Finance Minister Trevor Manuel on Africa’s COVID-19 Response – IMF F&D
- Trenches