For Mboweni's growth plan to succeed the ANC has to give up certain dogmatic positions that were formulated when 7% growth was the status quo, writes Adriaan Basson.
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Finance Minister Tito Mboweni. (Esa Alexander, Gallo Images, Times Live, file)
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Like a good doctor, Finance Minister Tito Mboweni has presented the governing ANC with a thorough diagnosis of the country's major ailments and a plan to turn things around.
Mboweni appeared before the ANC's national executive committee (NEC) on Sunday in defence of National Treasury's growth plan for the country, which will shape the medium-term budget statement he will deliver on October 30.
One doesn't have to read much further than this frightful point in Mboweni's 35-page presentation to the NEC to fathom the depth of the mess we're in.
"State-owned enterprises pose a massive risk to economic stability and fiscal sustainability. Eskom's total debt is equivalent to 9% GDP – the same size as the mining and agriculture (sectors) combined."
Take a deep breath, make a cup of tea and read this again. Eskom's debt of over R440bn is equivalent to the total value of products and services produced by South Africa's mining and agriculture sectors combined in a year.
Mboweni is not exaggerating when he says SOEs, primarily Eskom, pose a "massive risk" to the country. With faltering economic growth and lower tax revenues, South Africa can simply no longer afford Eskom and other money sapping SOEs.
Like a household in deep trouble, we are spending more than what we earn. This is a recipe for disaster and we don't have parents to move back in with.
Interestingly, Mboweni mentioned e-tolls, the National Health Insurance (NHI) and the Road Accident Fund as government programmes placing "demands on the fiscus". Has he convinced the ANC to shelve at least some of these until the economy has showed signs of recovery?
Think what you may of the straight-shooting Mboweni, but he has presented the governing party with the first real plan in a decade to make significant spending changes and avoid a bail-out by the International Monetary Fund (IMF).
For Mboweni and, I would argue, South Africa to succeed, the ANC has to give up on certain dogmatic political positions that were formulated during a different time, when 7% growth was the status quo.
According to Mboweni growth is likely to remain below 2% for the next two years and this means drastic measures if we want to survive. "If no corrections occur, in a slow growth environment, we face even greater adjustments in three years' time," he said.
What are some of the holy cows Mboweni has forced the ANC to discuss, reconsider or scrap?
- The minimum wage: South Africa has one of the highest legislated minimum wages in the world, which makes us uncompetitive for big companies to invest here. "Global competitions for low-skilled work is intensifying and SA's unskilled labour is expensive," Mboweni said. The ANC government has for noble reasons adopted a minimum wage, but if this means thousands, if not millions, of unskilled South Africans are deprived of a job, instead of being employed, should the governing party not reconsider this regime?
- Privatisation: Mboweni makes a strong case for non-strategic SOEs to be sold and for the monopoly of certain SOEs to be broken. Selling SAA and opening rail transport to the private sector should be high on this agenda. In the past, the ANC has argued that SAA is a strategic asset, but how "strategic" can it really be if the carrier keeps making losses in the face of a shrinking economy? Many developed countries no longer own a national airline. It's a luxury we cannot afford.
- Selling parts of Eskom: Treasury's growth plan punts selling Eskom's coal-fired power stations. President Cyril Ramaphosa is in the final stages of appointing a new CEO for Eskom who will oversee the restructuring of South Africa's single biggest risk, and selling off parts of the behemoth must be on the cards.Where will our growth come from? Mboweni argues that investment in tourism and agriculture has the biggest chance of success and creating sustainable jobs. The country must attract foreign investment – our tax base is shrinking – and bureaucratic obstacles to tourism and business must be removed.
The ANC will respond to Mboweni's plan in the coming days. Ramaphosa's party has a chance to help save South Africa, or to continue the path of overspending that will lead us to disaster.
- Basson is editor-in-chief of News24.
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