Embattled Gigaba warns of tough choices on SOEs and spending

GOVERNANCE at two of the most problematic state-owned enterprises (SOEs) is likely to be deepened after Finance Minister Malusi Gigaba announced new measures this week.

Gigaba is hard-pressed to salvage his credibility and, by extension, that of the Treasury by implementing interventions to limit the drain on the fiscus and allow funds to be reprioritised.

Weak economic growth in the first quarter of 2017 and multiple downgrades of the government’s credit rating to junk status meant “our 2017 growth projection of 1.3% may not be realised”, he said at a press conference on Thursday. The climbdown comes ahead of a meeting in two weeks with President Jacob Zuma, where a detailed plan of action for the economy and timelines to implement these plans is to be established.

Gigaba said at a meeting with Zuma on Wednesday evening and at presentations before the cabinet last week that he was “extremely candid about the risks we are facing”.

A significant challenge will be to raise revenue — although the Treasury would not raise the personal income tax rate, Deputy Finance Minister Sfiso Buthelezi said.

Gigaba said “hard decisions” had to be made, with the possibility of further cuts in government programmes and “spending in a manner that is going to reduce wastage and make money available for social expenditure and economic development”.

But this could be hampered by public sector wage negotiations this year. “We are going to be doing a lot of work to determine what we can do with the budget . . . what programmes can be reprioritised.”

Efficiencies in SOEs was another issue the Treasury would tackle.

SAA will appoint a new chairperson later this year after Dudu Myeni’s contract expires. Myeni is a close associate of Zuma.

Her reappointment for a year last year was considered to be a compromise agreement by former finance minister Pravin Gordhan, who was opposed to her long tenure in the chair while SAA was mired in controversy over its financial difficulties and irregular contracts.

The SAA board is to be strengthened with two new appointees. The Treasury will insist on candidates with extensive aviation experience and expertise. It would recommend a candidate for SAA chief executive to the cabinet in the next few weeks, Gigaba said.

He was confident that Public Enterprises Minister Lynne Brown would fill vacancies in the board and executive at Eskom, he said.

“If governance issues at Eskom were addressed and confidence built, Eskom would fall off the list of major concerns. We’d even be in a position to scale down their guarantees.”

The power utility holds the largest government guarantee of R350-billion. It had cashed in R200-billion so far.

Gigaba said that over the past two months he and Buthelezi had held numerous and candid discussions with international and credit ratings agencies; that in the short term the government should provide policy certainty, and stabilise and revitalise SOEs, were key messages heard.

The cabinet has committed to wrap up unresolved policies on minerals and resources, broadband and land and agrarian reform, among others.

The Treasury will fast-track public consultation for and finalisation of the Public Procurement Bill. This will facilitate, among other things, procurement from black-, women- and youthowned businesses.

“We will develop proposals to increase the amount of assets the Public Investment Corporation and other SOEs give black asset managers to manage,” he said.

Buthelezi said black asset managers had expressed frustration at a meeting with him on Thursday morning that not enough assets under management in the country had been placed in black hands.

The Treasury would instruct SOEs on the issue, because “it cannot be allowed that black asset managers are spectators. They must come with their schedules as to how they are going to correct this narrative”, he said.

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We are going to be doing a lot of work to determine what we can do with the budget Not enough assets under management in the country had been placed in black hands