Partial privatisation may be part of reform
SOUTH Africa will consider partially privatising struggling state-owned companies as part of wide-ranging reforms set in motion by President Cyril Ramaphosa since he came to power last month, the head of the National Treasury said on Saturday.
Dondo Mogajane said South Africa was at the end of a credit downgrade cycle after Moody’s held its investmentgrade rating and raised its outlook on Friday, partly because of Ramaphosa’s plan to reform state companies.
A downgrade to a junk rating by Moody’s would have seen South Africa removed from Citi’s World Government Bond Index, and could have triggered up to R100-billion in asset sales by foreign investors.
Investors have cheered Ramaphosa’s arrival and his choice of respected ministers in key roles, including former finance minister Pravin Gordhan as minister of public enterprises.
Gordhan is tasked with turning around state companies that have plunged public finances into crisis in recent years, including heavily indebted power utility Eskom and South African Airways (SAA), which is on the brink of bankruptcy.
“Why not?” Mogajane said when asked if it was possible parts of government-owned companies could be sold. “For me, I see it as the end,” Mogajane said.
“Moody’s are saying there are things we can do and these are the things we will be focused on,” he added, highlighting plans to stabilise debt, revamp state firms and boost growth in sectors such as agriculture and tourism.
“There have to be new ways of looking at these things. Are we talking privatisation? Are we talking equity partnership?”
Mogajane gave as theoretical examples the sale of 49% of SAA and of attracting private investors by splitting up the generation, transmission and distribution sections of Eskom, one the world’s biggest power utilities.
His comments are likely to go down badly with powerful trade unions, sections of the ruling African National Congress (ANC) and the Economic Freedom Fighters.
Ramaphosa is walking a tightrope as he seeks to win back the support of investors and voters disillusioned under former president Jacob Zuma while holding together a divided ANC ahead of an election next year that is likely to be the closest fought since the end of apartheid in 1994. —