SOEs’ endless demands are threats
Government determined to implement structural reforms, says Mboweni
The “never-ending demands” of state-owned enterprises, the public sector wage bill and corruption and general mismanagement are the major threats to SA’s fiscal sustainability, finance minister Tito Mboweni said on Thursday.
Mboweni was speaking at a breakfast hosted before the departure of SA’s delegation of business and government leaders to the World Economic Forum (WEF) in Davos, Switzerland.
But Team SA must communicate the country’s investment case as a host of domestic troubles foment, including the cash crisis besetting SAA, power supply shortages at Eskom, a flagging economy and fragile state finances.
“The major threats to fiscal stability in SA are clear,” Mboweni said, starting with the demands from SOEs.
SOEs that are able to demonstrate a sustainable revenue stream that can fund a business will require support, he said, but those that cannot should “ask themselves about their existence”.
“Are they going to be dependent, forever, on the fiscus? Are they really running businesses?” Mboweni said.
His comments come as the state battles to find a resolution to cash-strapped SAA which is in business rescue.
Business Day reported that it now faces liquidation because the state has had difficulty finding R2bn in post-commencement funding for the process.
The growing public sector wage bill, though “difficult to talk about” was another “huge threat to our fiscus”, he said.
“And this has to be approached responsibly in trying to find a solution, before the February budget.”
The WEF gathering comes before SA’s February budget where Mboweni is expected to outline efforts to rein in the government’s ballooning spending, which has pushed state debt to 60.8% of GDP in 2020 and widened the budget deficit to 5.9%.
Ratings agencies including Moody’s Investors Service — the last agency that holds SA government debt at investment grade — have flagged the fiscal challenges, and the need for SA to enact structural reforms to boost economic growth.
Mboweni noted that the Treasury has asked parliament for a date of February 26 to deliver the budget.
He also railed against corruption, waste and mismanagement at the national, provincial and local government levels, which destroy bulk infrastructure, and cost the state to replace.
In heading to Davos, however, Mboweni said that “there is a determination on the part of SA authorities to implement serious structural reforms”.
These are contained in the draft Treasury paper outlining a growth agenda for the SA economy.
“Most of these reforms are clearly indicated in the paper,” Mboweni said.
“These include, among others, a determined effort to put SOEs on the correct path. Those that work must be supported; those that don’t work must get out of the way.”
“The pace of structural reforms is not where we want, so we need to speed up to generate the [circumstances] for economic growth.”
Mboweni also emphasised the independence of the SA Reserve Bank and gave reassurances that this would be communicated to global investors.
“We will tell them that the Reserve Bank ... by the virtue of the constitution ... pursues its objectives independently without fear or favour,” he said.
The ANC has resolved to nationalise the bank, despite criticisms that the move would achieve little in terms of its function or mandate, and could be costly for the government.
Mboweni publicly opposed this resolution in a series of tweets on Tuesday, and was hauled over the coals by the ANC for expressing his view outside party lines.