SA Inc flies high as government moves to implement its economic action plan
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THE INVESTMENT case for SA Inc got a much-needed boost last week as the government moved to implement vital aspects of its economic recovery plan by announcing long-awaited reforms.
These included a strategic equity partner for SAA as well as lifting the cap on power self-generation, which business leaders and analysts welcomed.
Public Enterprises Minister Pravin Gordhan took the reform programme a notch higher on Friday when he announced the preferred strategic equity partner for SAA.
Gordhan said the government would relinquish control of the struggling airline to a private company, Takatso Consortium, after 19 months of uncertainty.
“The objective of bringing in an equity partner to SAA is to augment it with the required technical, financial and operational expertise to ensure a sustainable airline,” Gordhan said.
Gordhan said the objective of the partnership with the private sector was to re-launch a flexible, agile airline that would not be dependent on the fiscus.
“The government will not be putting any more money into the new airline,” he said.
Takatso is a new consortium comprising fund manager aviation group Global Airways and Harith General Partners, which is 30 percent owned by the Public Investment Corporation.
The consortium is expected to pump in more than R3 billion into relaunching SAA.
The government will have a “golden share” of 33 percent of the entity’s voting rights, with a longerterm strategic objective to create a listed vehicle/Initial Public Offering.
President Cyril Ramaphosa, in a surprise address on Thursday, a day after the country was plunged into the worst electricity crisis this year, kicked off the reform agenda.
Ramaphosa announced that the licensing exemption threshold for own generation under schedule 2 of the Electricity Regulation Act would be lifted from 1MW to 100MW.
The embedded electricity generation threshold means that firms such as mines and large industrial companies can now build their own power plants to supply electricity needs.
Business activity and large industrial companies have been crippled by power cuts as Eskom continues to ramp up loadshedding due to breakdowns at its aged power stations.
“This reform is expected to unlock significant investment in new generation capacity in the short and medium-term,” Ramaphosa said.
Along the slow Covid-19 vaccination roll-out, ratings agencies have listed loadshedding among the upward risks to the country’s outlook.
Both these announcements were welcomed as a re-commitment by the government to strengthen a business case for investment in South Africa.
Business Leadership SA chief executive, Busi Mavuso, said both announcements were incredibly positive and demonstrate a recommitment by government to charting a path that puts SA Inc first and strengthens our business case for investment. The prospect of energy security and a rational airline market were now real.
Business Unity SA chief executive Cas Coovadia said partnerships between the private sector and the government in non-strategic state-owned enterprises (SOEs) was the appropriate way to go.
“We also remain clear that the government must continue to review its SOEs with a view to rationalisation to ensure fewer SOEs that are efficient and sustainable.
“The closure of SOEs that serve no social or economic purpose must also be considered.”
Old Mutual Investments chief economist Johann Els said this development was both positive and encouraging, saying the government was taking charge of the economic policy.
With South Africa starting the process to extradite the Gupta family, Els said it appeared that Ramaphosa had decided to first deal with the corruption plaguing SOEs.
“This demonstrates that Ramaphosa has taken the view that the government needs to do everything it can to restore investor confidence in the country,” Els said.