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Gigaba's action plan lacks substance

Jul 16 2017 06:00
Justin Brown and Lesetja Malope

Johannesburg - The critical appraisal of Finance Minister Malusi Gigaba’s action plan announced this week was that it lacked substance, detail and would ultimately be judged on its tangible action and results, especially an improvement in economic growth.

Two major trade union federations slated the plan, while business was cautiously encouraging, but unconvinced. The three key ratings agencies adopted a wait-and-see approach.

Gigaba unveiled his action plan to try to re-establish confidence and to get the economy growing amid the country’s latest recession, further credit rating downgrades on the horizon and mounting job losses.

A key criticism of Gigaba’s plan, from a number of quarters, was that the plan contained few new ideas, if any.

Allan Mukoki, CEO of the SA Chamber of Commerce and Industry, said the strategy was good, but it remained to be seen what it would produce.

“At this stage, we welcome any plan, but the proof of the pudding is always in the tasting,” Mukoki said.

Martin Kingston, deputy president of Business Unity SA (BUSA), said the plan was a “constructive step in the right direction” that the business community should support. “We are pleased it acknowledges the role that the private sector plays in driving the economy.”

Standout points on the action list include finalising government’s latest multibillion-rand wage agreement by early next year, as well as improving the position of state-owned entities, especially Eskom and SAA.

The plan revealed that National Treasury intended to provide Eskom with “soft support”, which could mean a multibillion-rand bailout or increasing Eskom’s government guarantees to above R350 billion. This would follow on from the recent SAA bailout.

Khulu Phasiwe, an Eskom spokesperson, referred queries about the “soft support” to National Treasury.

Kingston said the talk of “soft support” for Eskom was raising concerns, as BUSA wanted any support for Eskom to be totally transparent.

Gigaba came under fire from Cosatu.

The trade federation said there was nothing new in the plan because it repeated the same recommendations that were contained in the presidential commission report, which advocated partial privatisation of state-owned companies. “We rejected the recommendations of that commission, like we reject this government’s inclusive growth action plan.”

SA Federation of Trade Unions (Saftu) said that Gigaba was following in the footsteps of “capitalist predecessors” – former finance ministers Trevor Manuel and Pravin Gordhan.

It was evident that Gigaba was trying to cosy up to business and investors. He revealed his plan at the JSE, the stock exchange at the heart of the capitalist economy, and quoted business-friendly commentators.

Saftu said the plan was a “vain attempt to shore up business confidence in government and to assure big business that his policy is just more business as usual”.

“This latest plan is proof that the statements about radical economic transformation by Gigaba were nothing but hot air and sloganeering,” Saftu said.

Dennis Dykes, Nedbank chief economist, said the action plan lacked detail and depth when compared with something such as the National Development Plan and was difficult to access, as a lot of the points were ambiguous and open for interpretation. It was unclear how the plan would be implemented, he added.

Real substance was likely to be found in the medium-term budget policy statement, which Gigaba would present on October 25, he said.

Dykes said he liked the timeline and the indications of who in government was responsible for what action point.

However, he said it was unclear whether the plan would boost growth and South Africa’s credit ratings.

Gigaba said that the plan wouldn’t do anything more than try to meet National Treasury’s 2017 growth forecast of 1.3%.

Growth of 1.3% or less is likely to maintain the pressure on South Africa’s credit rating, which has been rated as “junk” status by two of the major credit ratings agencies.

The first point on the action plan is to finalise a sustainable government wage agreement.

Saftu noted a “worrying call” for a sustainable wage agreement to be reached with public sector workers and this was “a clear warning” of tough talks ahead.

Gigaba made no mention about specific action to create jobs in his media statement, despite unemployment being at a 13-year high.

The key international rating agencies were tight-lipped.

Athos Larkou, a Fitch Ratings spokesperson, said: “I don’t think we will be able to comment just yet.”

Peter Griffiths, Moody’s Investors Service spokesperson, said: “We are not making any comment at this stage on the finance minister’s announcement.”

A S&P Global Ratings source said: “We will wait and watch the measures with a view to see whether they deliver tangible results in terms of improved GDP growth.”

The Chamber of Mines said its representatives had met with Gigaba this week to discuss the crisis facing mining.

North-West University professor Raymond Parsons said he was unconvinced about whether the plan would restore confidence.

Gigaba's action plan

14-point action plan

1. Fiscal policy

2. Financial sector and tax policy

3. Leverage public procurement

4. Recapitalise state-owned enterprises (SOEs) and address government guarantees

5. Broader SOE reforms

6. Private sector participation framework

7. Costing development mandates

8. Energy

9. SAA

10. Telecommunications

11. Postbank licensing

12. Mineral and Petroleum Resources Development Act Amendment Bill

13. Mining Charter

14. The regulation of land holdings bill

Key action plan deadlines

July 2017

Eskom to submit to Treasury and Eskom board a case for ‘soft support’.

Gigaba to:

Implement preferential procurement regulations.

- Set up private sector participation framework.

- Finalise SAA CEO appointment.

August 2017

Gigaba to:

- Finalise recapitalisation of SAA and SA Post Office.

- Consult SOEs on costing of developmental mandate.

Minister of Energy Mmamoloko Kubayi to:

- Review pace and scale of energy roll-out amid Eskom’s ‘hardship’ and overcapacity up to 2021.

- Review the level of participation by black industrialists and develop a strategy to increase it.

September 2017

Cabinet to approve terms of reference for the implementation of the remuneration standards oversight committee for SOEs. Gigaba to roll out development mandates template for inclusion in 2018 corporate plans.

October 2017

Cabinet to:

- Cut government guarantee issuance, especially for operational reasons.

- Determine consequences for SOE non-adherence to the guarantee conditions.

Gigaba to:

- Finalise infrastructure budget facility.

- Negotiate with SAA lenders to extend debt.

Rural Development and Land Reform Minister Gugile Nkwinti to table regulation of the Land Holdings Bill.

November 2017

SOEs to present private sector participation projects.

December 2017

Gigaba to convene financial sector summit. Department of Telecommunications and Postal Services to amend law to allow for SA Postbank licensing. Mineral Resources Minister Mosebenzi Zwane to finalise the Mineral and Petroleum Resources Development Act Amendment Bill.

February 2018

Department of Public Service and Administration to finalise government wage agreement.

Small Business Development Minister Lindiwe Zulu to finalise government fund aimed at financing small business. Kubayi to finalise lowest cost Integrated Energy Plan and Integrated Resource Plan.

Gigaba to:

- Work with the department of trade and industry on targeted debt relief for most vulnerable.

- Introduce micro insurance framework and review Cooperative Banks framework.

March 2018

Gigaba to:

- Finalise Public Procurement Bill.

- Establish framework for disposal of non-core assets.

- Conduct audit of non-strategic SOEs aimed at strengthening SOE balance sheets.

- Implement private sector participation framework.

- Implement a framework for the determination and costing of development mandates.

December 2019

Gigaba to finalise and implement SAA turnaround plan.

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national treasury  |  malusi gigaba  |  sa economy

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