BEE, Eskom priorities for Zuma

Johannesburg - Economic policy won't change much after the election, the ANC has promised, but the new government of Jacob Zuma faces many challenges. Economic problems are mounting.

One of the new government's priorities will be to address problems with black economic empowerment.

For some time, the ANC has had an internal debate about BEE and the fact it has only enriched a few.

But BEE is also in crisis as deal financing - traditionally linked to future earnings, dividends or climbing share prices - dries up.

A number of deals have already perished because of it, with rumours that banks have already started to "repossess" mines as BEE deals have sour due to the impact of the global crisis on mining.

According to the CEO of a big mine firm, there are growing concerns that failing mines could drag banks into a new crisis.

Given the lack of financing, it will be almost impossible to increase the current goal of 26% for black ownership in the mining charter and at the same time broaden the scope of BEE.

One option is to increase the BEE credit given for employee share schemes. It is easier and safer to finance and should ensure bigger numbers of beneficiaries.

It will also give some power to unions, which will manage these schemes on behalf of their members - one way to reward Cosatu for its loyalty to Zuma during his legal difficulties.

The new government also plans to improve efficiency at state-controlled entities like Eskom Transnet and SAA. It is expected that these groups will be combined in a single "super ministry".

Finance Minister Trevor Manuel's experience in the national treasury makes him the ideal candidate to head the super ministry.

He is expected to stay on in cabinet, but there are questions about conflicts of interest with him being finance minister as his wife, Maria Ramos, heads one of the biggest local banks.

Also, the new government is considering reviewing monetary policy, particularly inflation targets. Manuel is a strong proponent of the current system.

In his proposed new role, Manuel will be the most important implementer of government's economic policy as he takes charge of state-controlled infrastructure projects.

One of the biggest problems will be the financing of Eskom's projects.

If the power supplier has to finance its own projects, it will have to hike tariffs by 80%. Government has extended loans in the past, but might have to do equity injections in future - which leftists would prefer.

- Sake24.com

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