Amidst extreme levels of unemployment and the economy in a recession, Finance Minister Malusi Gigaba announced a plan on Thursday to improve confidence in the economy and boost growth. While the intervention was welcomed, issues of political credibility and government’s implementation abilities could hold it back. By GREG NICOLSON & ORATENG LEPODISE
The “inclusive growth action plan” released by Gigaba lists 14 areas requiring interventions, noting the responsible authorities and target dates. He said they were tabled after meetings with stakeholders, Cabinet ministers and the President after it was confirmed early this year that South Africa was in an economic recession. The major concerns raised by stakeholders included slow growth, rising government debt, the state of state-owned entities (SOEs), policy uncertainty and low business and consumer confidence.
“We need to emphasise the principle of leadership, united action. During these difficult economic times we need unity in action, unity in purpose of all the relevant role-players and leadership particularly emanating from government for us to be able to restore confidence in the economy and restore growth,” said Gigaba. He said the points of intervention stemmed from those discussions and President Jacob Zuma’s nine-point plan on building the economy.
A number of the targets related to SOEs. The minister plans to conduct an audit of non-strategic assets of SOEs by March 2018 and continue engagements disposing non-core SOE assets. He said the process, which could lead to the sale of certain government businesses, could improve the government balance sheet, but shouldn’t be done at the expense of social upheaval. Government plans to finalise the recapitalisation of South African Airways (SAA) and the South African Post Office by August and reduce the issuance of government guarantees for SOEs.
Gigaba said SAA had been plagued by problems for a decade and, after Treasury recently agreed to a R2.3-billion bail out, the airline must improve its effectiveness after government has repeatedly propped it up. The SAA board has chosen a CEO to lead the airline and Gigaba said he will present the proposal at the next Cabinet meeting, meaning the airline should have a new leader this month.
On Eskom, the plan said this month the National Energy Regulator of South Africa (Nersa) needs to be approached about the energy utility’s hardship. The plan said Eskom will have to “develop the case for Eskom soft support until tariff adjustments in 2018 and submit to Treasury and Eskom Board”. The minister said any additional support offered to Eskom must remain within the budgetary ceiling so as not to damage the state’s financial credibility. Regarding SOE’s, the plan commits leaders to finalising the private sector participation, remuneration, and board appointment frameworks by March 2018.
The plan said a “sustainable” wage agreement must be reached with public sector workers by February. It also called for the implementation of the Twin Peaks regulation in the finance sector by February. On giving a banking license to Postbank, a widely-supported policy within the ANC, it said there must be an amendment of legislation this year that would enable it to get its licence. That responsibility currently lies with the Reserve Bank, which is processing the application.
Regarding the controversial Mining Charter, the plan only committed the mining minister to engaging further with the industry, labour and society. It said the Minerals and Petroleum Resources Development Act Amendment Bill should be finalised by December and the Regulation of Land Holdings Bill should be tabled by October.
Gigaba said of the interventions: “Whilst they do not in themselves constitute an overarching economic recovery plan they constitute, however, an important intervention to restore confidence to demonstrate action and that we have an action plan by which we as government are prepared to be held responsible. All of the ministers that have been mentioned in this action plan understand the responsibility we jointly share.” He said the President will play a co-ordinating role in implementation. On his recent comments that South Africa may have to borrow from international financial institutions, he said: “Obviously we are not there yet, but it is a stark warning.
“Will the deadlines be effective? Yes, they will and we need to work very hard,” said Gigaba. Speaking on the recent discourse over “radical economic transformation”, Gigaba said there needed to be important conversations on transformation and economic growth but government leaders should resist speaking off script. “Those with the responsibility of leadership must understand that responsibility and live up to the expectations.”
South Africa’s economy has been under significantly increased strain since Zuma reshuffled Cabinet in March, replacing Pravin Gordhan with Gigaba. Since then, there has been a steady stream of allegations of corruption against the executive outlined in the #GuptaLeaks. Gigaba and his deputy, Sfiso Buthelezi, have both been accused of alleged abuses. The suspicions, and ongoing uncertainty around ANC policies, have created a credibility gap that could undermine the new minister’s interventions.
On Thursday, Gigaba said he would welcome a commission of inquiry into state capture so that those implicated could clear their names. He was not responsible for appointing an inquiry, he said, and there are currently debates around how such an inquiry should be appointed. Gigaba played down the policy uncertainty emanating from the ANC election race, but said reasonable democratic debate must still be managed sensitively.
Mike Schussler, chief economist at Economists.co.za, said there were many plans but few actions: “We need implementation.” He supported the finalisation of a sustainable public sector wage agreement as soon as possible and said the potential privatisation of some SOEs could help the economy. “There are a lot of good ideas, but my problem with the plan is we want to see implementation.”
CEO of the South African Chamber of Commerce and Industry (Sacci), Alan Mukoti, said he supported any efforts to boost growth. “I like the idea that the minister is requesting social parties to come up with ideas because this is a common problem we are facing and we cannot expect one person to be a genius and come up with solutions. We all need to chip in,” he said. “There are quite a number of good ideas. I just hope we will be able to implement it with the correct speed because we can come up with good ideas but don’t have the correct speed to implement it.” Mukoti also asked whether government would have the capacity to implement its plans. DM
Photo: Finance Minister Malusi Gigaba addresses a breakfast briefing at the ANC’s 5th National Policy Conference in Johannesburg 2017. Photo: Ihsaan Haffejee