Issues of state recapture

‘IF CAPTURE WENT ON FOR 8 YEARS, IT’S NOT GOING TO BE A QUICK FIX’ Ramaphosa must bring competing interests together to find common ground .

more creatively,” said Bhorat.

“It can manifest itself again if we continue with the nature and structure of growth we have had [capital-intensive growth that doesn’t absorb labour, with rising inequality, and modest poverty changes].

“It’s a classic middle-income country growth trap. If you combine that with a toxic political environment, that is what allows for what we’ve seen in terms of state capture, as the growth benefits are not there for society that is essentially fragmented along racial lines. What the current Ramaphosa regime offers is a window of opportunity to do growth differently.” This is far from simple. Ramaphosa must bring competing interests together to find common ground. “He has to show distinct change to keep the business community and ratings agencies on board,” said Silke.

“But how does he balance that to retain unity within the ANC and to appease populist sentiment?”

Ramaphosa has at least begun with a focus on reforming state-owned enterprises that appear to have been primary looting targets and represent serious risk to the fiscus. “It’s almost true to say that, outside of Eskom, you can fire everyone on all SOE boards and you won’t lose anything,” said Bhorat.

“And once you reengineer the boards, you are on your way because they can then appoint new CEOs and CFOs and so on.”

Taljaard agreed. “A huge amount of work is needed on the balance sheets of SOEs and finding structures that are workable and sustainable…”

Another big issue is the public sector wage bill – nearly 35% of government’s budget. “Ratings agencies will want to see action on government expenditure, and at least freezing or curtailing of some of the excess in the public service,” said Silke.