South Africa’s President Cyril Ramaphosa pledged on Thursday to speed up 230 billion rand ($16.11 billion) of support for ailing power utility Eskom, which he said was too vital to be allowed to fail.
“Eskom is too vital to our economy to be allowed to fail,” he said. “We will therefore table a special appropriation bill on an urgent basis to allocate a significant portion of the 230 billion rand fiscal support that Eskom will require over the next 10 years in the early years.” National Treasury Director-General Dondo Mogajane told Reuters the government hopes parliament will approve the bill before the end of August.
In February the government pledged a 23 billion rand a year bailout over three years, but the firm says it needs more cash to keep the lights on after nationwide blackouts this year.
A trade union leader turned businessman, Ramaphosa replaced scandal-hit predecessor Jacob Zuma as president in February 2018 and then was elected president after his party won a majority in May 8 parliamentary elections.
He faces a huge task reviving an economy that just posted its biggest quarterly contraction in a decade.
“We need to focus on those actions that will have the greatest impact,” he said in the speech. “Our economy is not growing. Not enough jobs are being created. This is the concern that rises above all others”.
The economy slumped by 3.2% in the first three months of 2019. Unemployment — which has remained stubbornly high a quarter century after the end of white minority apartheid rule — is at a 15-year peak of 27%, as more and more young people enter the job market each year.
“The brutal reality is that when it comes to youth unemployment, we have to run just to remain in the same place,” Ramaphosa said.
The rand gained slightly after the president’s speech, firming 0.5 percent to 14.27 against the dollar at 1800 GMT.
Adding to its litany of financial woes, South Africa’s investment-grade credit rating is hanging by a thread. Only Moody’s still maintains it, and the outlook for that rating was hurt by the latest GDP data. A downgrade by Moody’s to junk would risk billions of dollars of outflows.
Fixing Eskom and other loss-making state-owned firms such as South African Airways (SAA) is seen as critical to shoring up confidence among the investors South Africa relies on to finance its current account and budget deficits — the latter is projected to rise to 4.5% of GDP this fiscal year.
“To meet our growth targets, we will rebuild the foundations of our economy by revitalising and expanding the productive sectors,” Ramaphosa said, including “clothing and textiles, gas, chemicals and plastics, renewables, and steel and metals fabrication sectors.”
Ramaphosa also faces factional fighting within the ANC, highlighted by an opposing faction’s call this month to pressure the central bank to do more to boost employment and growth.
“The Reserve Bank must pursue (its mandate) independently, without fear, favour or prejudice,” Ramaphosa said, re-affirming his rejection of that call.
“The most important issues, of the bank’s independence, the primacy of price stability, all of that was made clear,” Razia Khan, chief economist at Standard Chartered said of the speech. “But you cannot ignore that the broad thrust was accelerating growth. That message will be understood by everyone.”
Among aims that Ramaphosa called ambitious were making the economy “grow at a much faster rate than our population … putting two million more young people in work, halving violent crime” and “ensuring no South African goes hungry.”
He also re-affirmed a commitment to redistribution of land, a key but controversial issue in nation where decades of colonialism and then apartheid saw millions of black South Africans dispossessed of their land by a white minority.
Opposition party leaders complained that the speech was heavy on rhetoric but short on detail.
“He instead described the challenges of South Africa but really no tangible plans,” Mmusi Maimane, who leads the main opposition Democratic Alliance, told the state broadcaster.
“It was all based on allegory, a dream.” ($1 = 14.2800 rand) (Additional reporting by Nqobile Dludla in Johannesburg; Writing by Tim Cocks; Editing by Alexandra Hudson and Hugh Lawson)