Cape Town - President Cyril Ramaphosa said a number of factors had led to the technical recession.
He cited the combination of poor business and consumer confidence; the lack of production due to load shedding; and a slump in agriculture that had led to the negative growth in the last quarter. The economy contracted by 1.4% in the fourth quarter, after another poor showing in the third quarter last year.
All the signs were there for the country to slide into a technical recession, Ramaphosa said, while briefing the media in Tuynhuys on Tuesday.
“Load shedding has severely impacted production, both at the manufacturing level as well as trade,” Ramaphosa pointed out.
“Agriculture slumped the greatest, which could be ascribed to the drought that many parts of our country have been experiencing. But I think more importantly, business and consumer confidence has been negatively affected.”
The president added that the government was trying to put Eskom’s house in order.
He said the appointment of new chief executive André de Ruyter was to stabilise the ailing power utility.
The president also indicated that Cosatu’s idea for pension funds to be used to take half of Eskom’s debt was still under discussion.
Eskom owes its creditors more than R454billion, and Cosatu wants pension funds to get a stake in the power utility after channelling funds into saving it.
Finance Minister Tito Mboweni has also backed the idea.
Ramaphosa said pensions have been used in the past to invest in major projects. He said reducing the public wage bill was also still being discussed.
This had angered the unions after Mboweni announced major cuts in the public sector wage bill in his Budget speech.
The minister said they were aiming to reduce the public wage bill by R160 billion over three years. Ramaphosa indicated they were considering a number of ways to cut the public wage bill, adding that the wage bill consumed 40% of the Budget, and had to be trimmed.
But the unions said the public wage bill can’t be targeted, and there were areas where money disappears, including corruption and fruitless and wasteful expenditure.
But the president said the government had considered a number of areas where money could be saved and one was to cut expenses on travel, which would require officials to fly economy class.
Ramaphosa said he had already done this when travelling locally. “There are a number of areas, but the public wage bill is still the biggest.” Ramaphosa has over the past two years been on a drive to raise $100bn (R1.5 trillion) over the next five years. Several major firms last year committed to invest billions of rand in the economy.