The heads of South Africa’s biggest companies urged President Jacob Zuma to sell state-owned assets, increase taxes and review the country’s labour laws as part of a raft of proposals to try and avoid a credit-rating downgrade to junk.
The government should appoint experienced professionals to the boards of state-owned companies, cut expenses and implement the National Development Plan, according to Mike Brown, the chief executive officer of Johannesburg-based Nedbank Group, who attended the meeting with as many as 140 other business leaders and cabinet ministers on February 9. It must also review legislation that is hampering further investments, he said in an e-mailed statement on Thursday.
Accelerated partnerships between companies and the state and “the appointment of a standing anti-corruption committee to combat graft in both the public and private sectors” were also discussed, said Brown, who last month hosted a meeting of CEOs at Nedbank’s offices with Finance Minister Pravin Gordhan. “Business has a number of suggestions that have been made to government , including, in particular, on the short-term issue of avoiding a ratings downgrade,” he said.
Zuma makes his state-of-the-nation speech to the National Assembly on Thursday night amid mounting public discontent over his leadership and pressure to restore confidence in a stagnating economy. Business leaders were galvanised into action in December after the 73-year-old president fired his respected finance minister and replaced him with a little-known lawmaker, sending the nation’s currency, stocks and debt plunging. While Zuma backtracked days later on the urging of CEOs of the country’s biggest banks, the rand and bond yields have still not recovered.
Gordhan, who was reappointed to the post that he’d held from 2009 to 2014 after the December market rout, has said the government will do everything possible to ensure that the nation’s debt isn’t downgraded to junk. Moody’s Investors Service cut the outlook on South Africa’s Baa2 credit rating, the second-lowest investment grade, to negative in December. Standard & Poor’s, which puts the nation’s debt one level below Moody’s, also changed its outlook to negative.
When the National Development Plan — a framework for boosting growth that was drawn up in an effort led by former finance minister Trevor Manuel in 2011 — was first published it showed South Africa needed economic growth of 5.4% a year and expansion in railways and ports to reduce poverty and create jobs in a country where one in four is unemployed.
While the likes of Eskom Holdings and South African Airways are a drain on the fiscus, any talk of selling stakes has been met with opposition from politicians and labour in the past.
On February 2, the World Bank cut the nation’s growth forecast for this year to 0.8% and warned the economy was “flirting with stagnation, if not recession.” Two days later, Moody’s said state debt could climb to more than 50% of gross domestic product for the first time in more than a decade as tax revenue slows.
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