finweek

A to-do list for the new president

President Jacob Zuma during his closing speech. (Gianluigi Guercia, AFP)
President Jacob Zuma during his closing speech. (Gianluigi Guercia, AFP)

With business and consumer confidence at multi-year lows, GDP growth on a downward trend since 2010, and poverty and unemployment on the rise, the new leader of the ANC would likely want to show some improvements ahead of the 2019 elections. 

The first major task would be to try and avoid a downgrade by Moody’s in the first quarter of the new year, but it may prove tricky to cut expenditure and raise taxes sufficiently. 

Annabel Bishop, group economist at Investec, says the new president of the ANC should provide clarity around economic policy, and the removal of threats to private sector property rights would help as well. 

Additionally, corruption needs to be eradicated and public expenditure reduced, not just the growth rate of expenditure capped or reduced, she says. 

The governance of state-owned enterprises (SOEs) also needs to be addressed, Bishop says. 

“They must eventually become so profitable that they no longer need to utilise government guarantees and increased borrowings,” according to Bishop.

“The SOEs’ debt levels are so large that if they needed government to step in and make good on their debt repayments, government wouldn’t be able to do so.” 

Warren Ingram, executive director at Galileo Capital, says SOEs should be reorganised, with Eskom for example broken up into two or three divisions, separating power generation and distribution and getting private investors involved. 

Ingram believes concrete steps should be taken to restore investor confidence.

“That means things like the Mining Charter need to be revised completely and made extremely business-friendly. We need to take the whole debate around nuclear off the table altogether. And we need heavy investment in businesses like the independent power producers,” he says. 

The mining sector alone has lost about 70 000 jobs between 2012 and 2016, with Anglo American CEO Mark Cutifani warning that more jobs will be lost unless an investment-friendly regulatory environment is created. 

Amendments to the Mineral and Petroleum Resources Development Act (MPRDA), for example, which were passed by Parliament in 2014 but then sent back for further deliberation by President Jacob Zuma, have still not been finalised.

In addition, a court case to set aside the new Mining Charter, which was gazetted without proper public consultation and contain requirements that are potentially in breach of the Constitution, has been postponed until February 2018. 

This is an extract of an article that originally appeared in the 14 December - 17 January edition of finweek. Buy and download the magazine here.

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