Obsession with the cookie jar
THERE are two interesting developments that should worry those who have been monitoring the government’s ability to manage public funds properly in the past few years.
These developments include the reported appetite by the government to rescue the embattled VBS Bank, recently embroiled in a massive looting scandal by executives.
The second is reports that the government aims to create a sovereign wealth fund to invest in high-risk strategic areas of the economy. In simple terms, the creation of such a fund is meant to pull public funds to invest in areas the private sector is not interested in because the risks are too high.
These are areas of the economy that are capital intensive and yet strategic for the government’s economic goals.
Under normal circumstances, there is nothing wrong with the government intervening to rescue a bank such as VBS.
The intention is to ensure that there are many players in the financial services sector in order to avoid monopolies. Such intervention by the government should, however, be in the public interest and to the benefit of the economy.
Furthermore, it is important for the government to create vehicles such as a sovereign wealth fund as long as it is meant to maximise the focus on investment in areas that are of strategic interest and would otherwise be neglected if left to the private sector.
, it makes sense for the government to venture in and stabilise the local markets in order to ensure necessary corrections in the economy.
The challenge that the ANC-led government is facing in its attempt to intervene in the economy — by way of protecting VBS and creating a sovereign wealth fund — is that it is the government’s own ineptitude that has largely perpetuated conditions that require the mentioned interventions.
The collapse of VBS is an indication of what happens when the government fails to protect public resources and demand accountability on behalf of the people.
The evidence shows that VBS was looted by the politically connected while the government stood watch. This raises a moral question regarding the reported manoeuvre by the government to protect VBS from liquidation, instead of subjecting it to the harsh reality of the markets, according to which it should fold.
From a political point of view, VBS is also to be rescued because Steinhoff was not allowed to fail.
If the markets are biased towards Steinhoff — by protecting the company from collapsing despite grand-scale theft — why can’t we intervene to save VBS, which lost much less money compared to Steinhoff?
It is clear that some of the decisions by the government, particularly the failure to fight corruption, have created a situation where lending institutions are no longer keen to lend it money.
The majority of state-owned entities (SOEs) are in a severe cash crunch.
The main cause of the problem, however, is not the structural problems that have to do with the self-sustainability of SOEs.
The problems have to do with failure to adhere to basic principles of good governance and accountability by the government.
In fact, some individuals used their positions in government not only to undermine accounta- bility, but to facilitate misappropriation of funds.
As a party, the ANC had no recourse on the conduct of its leaders in government.
Worse, ANC members continue to elect those who are alleged to have taken part in such schemes.
The last thing the ANC-led government wants to do is to be seen coming up with schemes that would allow the party’s hands back in the cookie jar. While SA is reeling from years of corruption, the government needs to be sensitive and allow for a cooling-off period before experimenting with vehicles such as a sovereign wealth fund. It must show a willingness to pursue good governance in order to regain its legitimacy.
The creation of a sovereign wealth fund at this moment will be tantamount to creating a mega fund that the government can manage without having to account to anyone.
A sovereign wealth fund should be created not to avoid accountability, but to pursue development goals for the economy.
Our government has to do more to make a convincing case it is acting in the public interest in relation to intervening in such matters.
• Ralph Mathekga is a fellow at the SA Research Chairs Initiative chair: African Diplomacy and Foreign Policy at the University of Johannesburg and author of When Zuma Goes and Ramaphosa’s Turn.