South Africa has moved further away from where it was a year ago, but the pace at which structural reforms have taken place has not been fast enough to generate the necessary momentum to fuel economic growth.
This is according to Finance Minister Tito Mboweni. He was speaking on Thursday ahead of his trip to the annual World Economic Forum (WEF) gathering in Davos, Switzerland next week.
Mboweni will lead TeamSA, which will comprise Minister of International Relations and Cooperation Naledi Pandor, Minister of Trade and Industry Ebrahim Patel, and a delegation of the country’s business leaders.
No standing ovation
The mood at the breakfast briefing at the Crowne Plaza Hotel in Rosebank, where stakeholders from government, business and labour were gathered, was markedly different from when President Cyril Ramaphosa addressed the same meeting in 2019 and received a standing ovation.
At the time the message was of hope, renewal and growth, despite the tough challenges of low economic growth and struggling state-owned entities (SOEs).
A year later the depth of the economic crisis in South Africa, which Ramaphosa described as the “nine wasted years” while in Davos last year, has become clearer.
The economy continues to shrink, the unemployment rate at just under 30% is at an all-time high, with no sign of stopping and the country’s monopoly power producer Eskom has struggled to keep the lights on and costs down. All this while credit rating agency Moody’s is assessing whether or not to keep South Africa’s sovereign debt at investment grade.
“I’ll be honest to say the pace of the structural reforms is not the way we want it to be, so we have to speed up reforms in order to generate this urgent impetus for economic growth,” said Mboweni in response to what message South Africa would take to investors in light of the current state of the economy, despite the unfulfilled promises of the past.
Mboweni said the team would emphasise to investors that the authorities are “determined” to implement serious structural reforms as outlined in the economic strategic paper released by National Treasury last year.
This includes, among others, a determined effort to put SOEs on the correct path. “Those that work must be supported and those that don’t work must get out of the way,” Mboweni said.
This comes as government is under immense pressure to find its R2 billion contribution to the business rescue plans of cash-strapped South African Airways, or face the airline going into liquidation.
Mboweni said the government is “still trying to find additional funding” for the airline.
“Let’s keep our fingers crossed.”
On Eskom’s electricity supply challenges, Mboweni said the team would give a realistic picture of the issues and not “lie” to investors or “spin” the troubles at the state utility. However, he added that he would also not be a “doomsayer”.
“It’s not true to say we have no electricity in South Africa,” said Mboweni. “We experience load shedding from time to time as the Eskom management fix this and the other problem, that is true.”
Some of the key reforms the government has put in place in terms of electricity supply is a plan to split Eskom into three separate entities and introduce internal competition within the generation department. Government has also softened its attitude towards consumers generating their own power and feeding the excess to the grid, as Eskom struggles to meet demand.
In an attempt to put the country’s journey into perspective ahead of the Davos visit, National Treasury Director-General Dondo Mogajane said the challenges government is facing are those of a maturing democracy with complexities, and that sometimes solutions will not be as “simple as A or B”.
“We are on a transformative journey and it is complicated by nature, and there are many layers of contradiction and there are many layers of complexity that we will come [across] as we embark on the journey.
“There is a lot that we must balance on the fiscus side, and a lot in terms of navigating the politics … the politics, which … if there is an explosion there, we won’t have a country tomorrow,” said Mogajane.
Despite these challenges, Mogajane said the country has to continue believing in the vision of renewal as well as transformation as detailed in the National Development Plan.
Another area of concern is government spending which, despite its efforts to cut spending, has ballooned due to the “never-ending demands of SOEs” and the public sector wage bill.
Not looking to sugar-coat anything Mboweni was clear that SOEs, together with the public sector wage bill, wastage and corruption, are a major threat to the state’s fiscal position.
Mboweni described the public sector wage bill as a “huge” threat to the fiscus. “We have to approach this responsibly, and in time to find a solution before the February budget.”
The budget is expected to be delivered on February 26.