Lukewarm response to Gigaba’s rescue plan
Not much new in finance minister’s bid to haul SA out of recession – experts
FINANCE Minister Malusi Gigaba tabled an “inclusive growth action plan” yesterday in response to the recession in South Africa, promising reform of state-owned enterprises (SOEs), fiscal prudence and a new dialogue on the Mining Charter.
However, Gigaba faced a barrage of questions around corruption and whether the plan was significant enough to reignite confidence.
His plan contained little that was new, but did include a commitment to timeframes in which several cardinal decisions would be made.
In a broad sweep, it echoed President Jacob Zuma’s ninepoint plan, introduced in the state of the nation address in 2015, with similar focuses on energy, reforming SOEs, broadband roll-out and encouraging privatesector investment.
While the ninepoint plan was lauded, there has been little action in its implementation.
Instead, state-owned companies have come under increasing scrutiny for poor governance, their reliance on government support has risen and the private sector has remained on an “investment strike”, looking increasingly for opportunities outside South Africa.
In a warning to his cabinet colleagues that they had better get on board, Gigaba hinted strongly that if the latest plan was not implemented, there was a possibility that the government would need to borrow money from the World Bank and the International Monetary Fund.
The plan includes 14 action items and 45 interventions that require the involvement of about 12 different stakeholders.
Most deadlines are set for March next year and include choosing a new chief executive for South African Airways (to be done this month), introducing legislation to regulate the appointments of the boards of SOEs, privatisation of non-core state assets, and a framework for public participation to raise equity.
It also includes a pledge to reach a sustainable wage agreement with public servants, recapitalising SAA and the South African Post Office and unspecified state support for Eskom, on which Gigaba said there was a deep appreciation of the weakness of its balance sheet. Gigaba said he supported further engagement with business on the Mining Charter and wanted to see new mining-regulatory legislation finalised in a manner that reflected the interests of civil society, labour and industry by the end of this year.
But, he said, “there’s an understanding at an [ANC] alliance level that privatisation is not the answer”.
He said the plan came after months of intensive engagement with interested parties and the cabinet to create a map forward.
But labour disputes this, saying it was not consulted and had tried unsuccessfully to meet with Gigaba since their last engagement at Nedlac in April.
DA finance spokesman David Maynier called the plan a disappointment, saying it did not contain any new ideas capable of restoring business confidence and stimulating private-sector investment. Most economists were sceptical. While agreeing it looked good on paper, the big question was whether it would be implemented.
BNP Paribas economist Jeff Schultz said: “Most of the interventions outlined today are not new.
“Policy makers have never been short of solid economic plans.
“What we have sorely lacked, though, is [their] implementation.
“As always, therefore, the proof will be in the pudding and the pressure will be on for Gigaba to already show some deliverables by the October medium-term budget.”
Professor Raymond Parsons, of the North-West University School of Business and Governance, said the acid test for the plan was whether it would boost confidence in the economy by producing real outcomes.
Argon Asset Management economist Thabi Leoka said it was operational, but did little to stimulate growth.
Although the plan was feasible, Leoka said, the question was whether it would be achieved.
“It would be more believable if the Treasury just did what it said and spoke about it after the plan was implemented.”
The task ahead calls for coordination across government departments, which has not been successful so far.
The Nelson Mandela Bay Business Chamber welcomed the plan of partial privatisation of SOEs, saying this was in line with what business had been urging for years.
“The proposed reforms and suggested public-private partnerships would be better positioned to fix the inefficiencies plaguing these entities,” Business Chamber acting chief executive Prince Matonsi said.
“Whether these action points are enough to deliver the desired outcome of substantially growing the
economy of South Africa remains to be seen.
“What cannot be tolerated anymore is the burden of ineffective SOEs.”
Matonsi said, however, that the “soft support [for Eskom] until tariff adjustment in 2018” was of concern.
“While details of this ‘soft support’ must still be made public, we as taxpayers cannot be expected to pay more to subsidise Eskom via the fiscus.
“We cannot accept the possibility of major electricity tariff increases of up to 28% next year.
“This situation will be disastrous for the country, and particularly for Bay businesses that depend on competitive electricity pricing.
“It could threaten the existence of many businesses and add significantly to the already high unemployment.”
Edge Financial Group managing director Edward Gutsche said: “There is no concrete proposal here, merely a proposal to continue engagements on disposing of non-core SOEs and provide feedback by March 2018. “This has been promised many times. “A badly performing or corrupt company will always [perform badly] if it has no accountable and experienced leadership with no actual plan.
“SAA, Transnet, Eskom will remain broken unless tough decisions are made about leadership, governance and operations.”