Macroeconomic reforms to kickstart growth
JOHANNESBURG - Government and business appeared to be moving towards a consensus on macroeconomic reforms to kickstart growth, embracing roles each must play in supporting the National Treasury’s policy paper.
Ahead of a decisive credit rating announcement by Moody’s, the ruling ANC broke with tradition and came close to embracing private sector involvement in the restructuring of troubled state-owned enterprises by partially supporting the economic recovery plan.
Finance Minister Tito Mboweni’s plan has been hailed by economists and investors as the necessary, but painful, injection the economy needs to boost growth.
The plan includes selling-off of Eskom-linked coal assets to the private sector and proposed subtle changes to labour law.
Ths as economic growth is faltering as forecasts show an expected 0.6 percent this year. Tax revenue is disappointing and the shortfall is expected despite tax hikes, including last year’s VAT increase, and the total savings pool of South Africans is rapidly shrinking.
The ANC’s national executive committee (NEC) said it appreciated the contingent liabilities imposed by enterprises such as Eskom, SAA and Denel on the economy.
NKC Research said the NEC seemed more willing than before to tackle ideological constraints to economic growth.
NKC’s analyst Gary van Stadens said the NEC discussions suggested that while Mboweni was unlikely to get all he wanted, he would enjoy some victories and change the overall thinking in the NEC and other key structures.
“It is now also clear that [President Cyril] Ramaphosa is backing Mr Mboweni, otherwise the proposals would not have been presented in their original form but in some watered-down version,” van Staden said.
“Most importantly, the policy proposals are now formally inside ANC policy making structures and not merely the work of some lone wolf maverick.”
Energy, resources and industrials leader for Deloitte Africa, Andrew Lane, said it there were also encouraging signs from Energy Resources and Energy Minister Gwede
Mantasheon draft of the Integrated Resource Plan (IRP).
The plan would be discussed by cabinet next week before it is released for further public comment.
“The minister (Mantahse) presented a very supportive position towards the industry this year, and I anticipate that he will adopt a pragmatic balance between coal and renewables,” Lane said.
“I do not think that he is going to be swayed by lobby groups as hidden agendas have been removed, and we will see coal in the IRP, as well as gas, and nuclear as part of the energy mix.”
On Eskom coal Lane said inefficiencies in the whole value chain, especially around wastage, should be corrected first before the government discussed cost reductions..
Mantashe said on Thursday that the government was pushing for the reduction of the cost of electricity to save the economy from a complete collapse following a 17 percent hike in coal costs.
“I think [Eskom is] just looking for every penny they can find. Coal is being sold at market price, but there are one or two contracts that may have anomalies. I would look for operational efficiencies at Eskom before coal contracts,” Lane said.