Business Maverick

Mboweni says he will fly structural reform flag at WEF in Davos, ‘fingers crossed’ on SAA

By Ed Stoddard 16 January 2020
Finance Minister Tito Mboweni at the World Economic Forum in Cape Town on 5 September 2019. Photo: Twitter/National Treasury

Finance Minister Tito Mboweni is going to the annual World Economic Forum talk shop in Davos to fly the flag of structural reform. Mboweni is serious, but it remains to be seen if the ANC is coming to the party. He has also embraced the ANC's stated commitment to non-racialism in an unexpected way. 

Every year, South Africa sends a delegation to the World Economic Forum (WEF) in the Swiss resort town of Davos. The event is not an investment summit, but the goal ultimately is to sell South Africa’s brand on a global stage. Finance Minister Tito Mboweni, who first attended Davos almost three decades ago, told a breakfast briefing on Thursday, 16 January that he would be assuring attendees there next week that South Africa was indeed embarking on structural reforms.

“There is a determination on the part of the South African authorities to implement serious structural reforms… These include among others a determined effort to put state-owned enterprises (SOEs) on the correct path. Those which work must be supported, and those which don’t work must get out of the way,” he told the gathering in Rosebank.

President Cyril Ramaphosa will reportedly be attending the UK/Africa investment summit in London.

“There is indeed a reform programme going on. It goes through successes and difficulties … Quarrels from time to time among colleagues within political parties. But the road map is clear going forward,” he said.

Mboweni recently complained on Twitter about the obstacle of “policy inertia” that was holding up structural reforms. In closing remarks on Thursday he also said that: “The pace of the structural reforms is not where we want it to be.”

So there is a reform programme under way, but the pace – a fitting metaphor for Davos – is glacial. Internal ANC squabbles, as Mboweni eluded to, is at the heart of this matter. He has taken flak from the party for expressing his views on such issues on Twitter, most recently on the mandate of and the proposed nationalisation of the South African Reserve Bank (SARB) – an ANC resolution. The former SARB Governor – who impressed markets when he was at the helm there – reiterated his defence of its independence as spelled out in the constitution.

On the pressing issue of South African Airways (SAA), he said government was still trying to raise badly-needed funding for the troubled airline.

“As of yesterday when I was speaking to the director-general of National Treasury we were still trying to find additional financing for SAA…. Let’s keep our fingers crossed,” he said. SAA is in the throes of business rescue and is waiting for a pledged R2-billion from government and R2-billion from lenders to remain airborne.

Mboweni also touched on the issue of agriculture, but against the backdrop of “expropriation without compensation” and land reform policies aimed at rectifying racial disparities in ownership, he came out swinging for emerging farmers regardless of their skin colour. He said there must be “support for agriculture, particularly emerging farmers, black and white. For me it doesn’t matter if an emerging farmer is white or black”. That comment is sure to raise some eyebrows, and not just from the red brigade of the Economic Freedom Fighters (EFF). Could someone with the surname Van der Merwe qualify for state support as an emerging farmer in Limpopo or the Free State?

Speaking about Eskom, Mboweni said you could not hide or spin the reality of load shedding, adding that: “You can’t be a doomsday sayer … who says there is no electricity in South Africa. The government has taken steps already to strengthen the management at Eskom.” Those are facts of course – there is indeed electricity in South Africa. This correspondent’s laptop is charging as these words are written. There is also electricity in Nigeria and Zimbabwe. In the wake of Stage 6 load shedding, such a statement surely rings hollow.    

On the public sector wage bill, Mboweni said it remained “a huge threat to our fiscus”, and that solutions needed to be found before he delivered his Budget speech next month. Reading between the lines, one can assume that there is a lot of wrangling going on there.

Trade and Industry Minister Ebrahim Patel said government had honoured pledges it made in Davos last year, including making it easier to register a business, via the BizPortal on the website of the Companies and Intellectual Property Commission. Requirements include a “3D Secure cheque or credit card that is enabled for online transactions”. This probably excludes much of the rural poor and the emerging farmers Mboweni spoke about. But for those with a credit card and internet access, that is hopefully a time-saving improvement.

Speaking about Davos more generally, Mboweni noted that: “It’s not an investment conference but people can meet and strike deals on the sidelines.” Perhaps with lenders for SAA, or another eurobond among investors who are hungry for yield?

Mboweni went on to say that: “It’s not a place where you go and read a long speech but a place where you speak on your feet and make your argument and convince other people.”

The people he needs to convince include the ratings agencies among others. They want the glacier that is the reform programme to melt into a fast-flowing stream, one that sweeps away dysfunctional SOEs, government waste, corruption and policy inertia. Mboweni is probably the right minister to try and convey that message at this time, and he will probably do so in his typically blunt manner. Still, an economy that is critically hobbled by load shedding, and may well be in recession with shockingly low levels of confidence and high rates of unemployment, is going to be a hard sell. Don’t be surprised if the reception is appropriately frigid. BM


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