Budget 2022

Fixing South Africa’s economy a long, hard haul, Ramaphosa says

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President Cyril Ramaphosa says his administration’s drive to turn the economy around will be protracted and is being frustrated by the rapid spread of the coronavirus around the globe and other factors beyond its control.

“These are trying and testing times,” Ramaphosa said at a two-hour briefing to journalists in Cape Town on Tuesday. “I like to believe that we have entered an era where there is no longer any objection to reforms and transformation. We are going to reform. As this moves, we will be repositioning our economy for further investments.”

SA has twice slipped into recession since Ramaphosa took office in February 2018, highlighting the challenges he faces in trying to undo the misrule and corruption that characterised his predecessor Jacob Zuma’s nine-year tenure. Gross domestic product shrank an annualized 1.4% in the last quarter of 2019, and expanded just 0.2% for the full year, the slowest pace since the global financial crisis, the national statistics agency said on Tuesday.

While the data is “not pleasing,” it’s not surprising given the country’s contending with power shortages, drought and low levels of consumer and business confidence, Ramaphosa said. South Africa has yet to have a confirmed case of the coronavirus, but the president expects it to have a “huge, huge impact” on the global economy, with a negative knock-on effect domestically.

Ramaphosa repeated reassurances that the government will fix debt-stricken state power utility Eskom, which supplies about 95% of the nation’s power, and restructure the energy industry to ensure private producers played a bigger role. Consideration should be given to selling some of Eskom’s older power plants to private investors who could operate them more effectively, he said.

“Our power generation has now entered a new era, a new era that should not be driven by ideology, but by pragmatism,” he said.

Ramaphosa described a plan proposed by the Congress of South African Trade Unions, the country’s biggest labour group, for pension funds to either assume part of Eskom’s R456bn in debt or take a stake in the company, as “quite compelling,” but said final details still needed to be worked out.

Cosatu wants the government to underwrite any losses incurred by pensioners and the implications that would have for the nation’s finances would have to be worked out, he said.

Other highlights:

  • While the government would have liked to have introduced a fiscal stimulus package to spur growth, it doesn’t have the requisite funds.
  • The government is in ongoing talks with unions about its plans to trim the state wage bill, its biggest expense. While union concerns about the cuts are understandable, an agreement with them is within reach.
  • South Africa has made progress in rebuilding its public institutions, but the process will take some time.
  • The president wants the civil services to be depoliticized and senior officials to be given long-term contracts.

- With assistance from Rene Vollgraaff.

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