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Treasury rocked as budget chief quits

Fin24 logo Fin24 6 days ago Adriaan Basson and Matthew le Cordeur | Fin24

JOHANNESBURG, SOUTH AFRICA – AUGUST 17, 2017: Minister of Finances Malusi Gigaba and President Jacob Zuma on August 17, 2017 in Johannesburg, South Africa. The opening of the Africa Regional Centre for the New Development Bank is held in Sandon. © Gallo Images / Beeld / Wikus de Wet JOHANNESBURG, SOUTH AFRICA – AUGUST 17, 2017: Minister of Finances Malusi Gigaba and President Jacob Zuma on August 17, 2017 in Johannesburg, South Africa. The opening of the Africa Regional Centre for the New Development Bank is held in Sandon. Cape Town – National Treasury has been rocked by the resignation of its long-time budget head, Michael Sachs.

Fin24 has obtained independent confirmation from two sources close to Treasury that Sachs, a deputy director general who headed up the budget office, quit last week over interference by the Presidency.

The issue of free higher education, that is being steamrolled by Zuma, has pushed Sachs, a Treasury veteran of ten years, to resign.

“Michael didn’t necessarily oppose the idea of free education, but he wouldn’t stand for the interference in the budget process,” a source said.

Zuma’s plan to find R40bn within the constrained budget to fund a free-education policy for families who earn less than R350 000 comes amid changes to the budget process, where National Treasury’s role in keeping a lid on government spending and finding the best ways to grow the economy has taken a back seat to the Presidential Fiscal Committee (PFC).

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In his mini budget speech in October, Finance Minister Malusi Gigaba said the commission of inquiry into higher education had submitted its report to Zuma on the feasibility to provide fee-free education. “We await the President’s determination and announcement in this regard,” he said.

Sygnia CEO Magda Wierzycka believes the PFC – which comprises a much smaller committee – has removed Treasury’s crucial fiscal oversight of a budget that is already on track to break the fiscal ceiling by R3.9bn if government doesn’t find a way to fund its South African Airways bailout.

"It is no longer a function of National Treasury. That function has been outsourced to Zuma and that is absolutely terrifying," she said at the Cape Town Press Club in October.

Jacob Zuma wearing glasses and a suit and tie: Treasury rocked as budget chief quits © Provided by Treasury rocked as budget chief quits It is through the new committee that Zuma’s no-fee proposal has been allegedly pushed. It was reportedly designed by Morris Masutha, a friend of a daughter of Zuma and Nkosazana Dlamini-Zuma's.

Sachs and other senior officials were apparently unable to go along with the new budget process to cut R40bn from the current medium-term budget policy statement to fund the proposal, Business Day reported on Monday. The newspaper first reported on the resignation of Sachs.

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The plan – which has been unconfirmed by the Presidency – has put the rand under increasing pressure, with the currency trading at R14.39 to the dollar on Monday morning at 09:00.

“Fears that President Zuma is set to announce free higher education will continue to weigh, particularly as almost every broadsheet in the country read the story on the front page over the weekend,” Rand Merchant Bank analyst John Cairns told investors on Monday.

“The president’s statement on the issue has only clarified that he did not want — as alleged in the Sunday media — to make the announcement during his State of the Nation Address, and adds nothing on his current thinking or planned actions.”

“If the President does plan to announce free higher education, then it would make sense to do this after the 24 November rating reviews, but before the ANC National Conference, implying late November or early December is a major period of risk. Rumours will continue in the interim.

“All South African markets are feeling the pressure. The sovereign CDS, in particular, has come under pressure and is now trading at levels that fully price another rating downgrade.

“Global issues are of secondary importance in driving the rand currently,” he added.

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