ANC looks for new levers to boost SA’s economy

Mulls using pensions and Reserve Bank to spur growth.
The document advocates increased government ‘guidance’. Image: Waldo Swiegers, Bloomberg

The head of economic transformation in South Africa’s ruling party has proposed a range of measures to bolster the economy, ranging from encouraging the use of pension funds and the central bank to finance infrastructure spending to the creation of a state bank and pharmaceutical company.

Enoch Godongwana’s recommendations to the African National Congress (ANC) come as the government tries to revive an economy devastated by the coronavirus pandemic.

“The Covid-19 shock is posing unprecedented challenges, the economic crisis entailed by the pandemic is unique,” Godongwana said in the May 22 document seen by Bloomberg. “Globally, central banks have reverted to their original role as bankers to their governments.”

While business and investors have been calling for strong government action to support Africa’s most-industrialised economy, the document may heighten concerns about state intervention and so-called prescribed investment – mandatory funding by private companies of certain sectors.

In the document, Godongwana proposed changing Regulation 28 of the Pension Funds Act to boost the funding of infrastructure projects spearheaded by state development finance institutions (DFIs) using private capital.

South Africa’s main state-owned DFIs are the Industrial Development Corporation and the Development Bank of Southern Africa, of which Godongwana is chair.

‘Financial plumbing’

He also suggested that the SA Reserve Bank help finance DFIs through the creation of a R500 billion fund. Money should also come from the Public Investment Corporation, a R2.13 trilliom fund manager that oversees civil servants’ pensions, Godongwana said.

“While it faces increasing continental competition, the South African financial-services sector can rightly be said to endow our emerging-market nation with ‘the financial plumbing of a rich place’ with deep, liquid markets,” he said.

While the document is a break with the thinking of some ANC leaders that the state should be responsible for much of the investment in the economy, it does advocate increased government “guidance.”

“A narrow and flawed understanding of what the developmental state is has led to the erroneous conclusion that it is only about public investments and public ownership, with a related over-emphasis on the limited funds of the state,” he said.

“A developmental state does not necessarily mean higher levels of state ownership, but high levels of guidance.”

In an interview with Johannesburg’s Business Times, which reported on the document earlier, Godongwana said the proposals didn’t amount to advocating for prescribed assets. They merely meant that regulations should be changed so that pension funds can invest in DFIs if they wish to.

Godongwana didn’t answer a call to his mobile phone. Neither did Pule Mabe, the spokesperson for the ANC.

The document also proposed the formation of a state bank, a pet project of Finance Minister Tito Mboweni, and a national pharmaceuticals company.

It also advocated, in contrast to the drive of some government departments, a swift move away from coal-fired energy to renewable power.

The state-owned Central Energy Fund should be used to partner private investors in new projects, Godongwana said.

© 2020 Bloomberg LP

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History conclusively proves that the ANC is only good for destroying an economy, not “boosting” it. They simply wouldn’t know where to start.

Exactly, replace the word ‘boost’ with the word ‘destroy’ for a better reflection of reality.

Indeed, they have destroyed the economy. Now they want to put their filthy hands on Pension Funds. The ANC cannot resist a pot of gold they can’t get their avaricious hands on.

If the government start to fiddle with the pension funds by putting their fingers in the cookie jar, there will be a reaction from the unions and employees that our dear cadre in government will not be able to control. Be warned.

I hope you are correct because by using pension money to fund SOE’s they are simply allowing looting to continue until the pension money is finished. The NHI is also an attempt to get their hand on the only other pot of money in SA i.e. medical aid contributions.

The ANC ha e not yet realized that the very policies that they want to use to boost the economy have destroyed the economy, long before Covid-19.

When your best companies are competitive, generating good profits and investing locally then you are winning.

I hope this makes it into the plan.

So many typos in headline, should be “ANC looks for new thievers to loot SAs economy”

One could also open up the sale of cigarettes and open toed shoes to boost the economy perhaps?

While on EWN … Cyril Says “I see a good future for SAA, and similarly, I see even a better one for Eskom.”

This coming from a businessman who cannot put on a mask on properly and has made billions without doing anything but getting it on a silver platter.

I find this hard to conceive in my little brain how this would work out … but who am I … just a tax payer that is milked to fund this rot.

I think I need to put the same GLASSES Cyril uses … Meanwhile on the other end NO ONE IN THE ANC is taking CYRIL SERIOUSLY:

1) The president announces a lift on the smoking ban and then it gets publicly overridden by Minister of Cooperative Governance and Traditional Affairs who is not even the Minister of Health!

2) The Minister of Education announces the opening of schools and the unions publicly override her decision and there is now chaos about what is going on with schooling

Cyril R, when Emirates Airlines starts operating … my intention is to get the hell out of here.

Also very happy that we heeded Magnus’s warning years ago to get our money out. Just waiting for the airlines to get ourselves out.

The ANC think that there are an infinite number of levers.

The levers are either stolen or broken.

The other thing is that there is no possibility for transformation with a failing entity, even if that entity is a country.

Nothing new here at all. We have seen this boring old movie so many times now. They are not advocating more nationalization of private business any more, but rather more “guidance” of how private enterprise and entrepreneurs should behave, where they should invest, who they should employ, what salaries they should pay, how they should support BEE projects and cadre-deployment, how they should support ANC socialist agendas and what their tax burden should be.

In short – private enterprise will now be “guided”, coerced is the right word, to further the interests of the ANC. For the ANC, this is much better than nationalization, simply because the entrepreneur is still under the impression that he owns the business. The entrepreneur will be responsible for the business plan, servicing the loans, paying the insurance premiums, handling labour issues, satisfying consumer queries, and worry about the solvency of his business, while the ANC reaps all the rewards. Under fascism, the entrepreneur is a slave to the state.

When a socialist state reaches the end of the road, when the inevitable eventually happens and the state bankrupts itself, then fascism is the next step on the road to ruin. The state takes control of private enterprise without taking ownership, thereby they get the benefits of nationalization without the risks and the costs involved. They can still tax the business and force it to pay rates and taxes to the local authorities, whereas if they nationalised these businesses and properties, the state would have lost all revenue. The entrepreneur becomes a government employee, without the benefits of a salary, bonus, pension fund and paid holidays. He becomes a slave, in other words.

Fascism is a step closer to complete slavery for the individual. Along with fascism comes a police state, and the constant harassment from military intelligence to flush out the dissidents. The next step is border control. Not to keep foreigners out, but to prevent locals from leaving.

Godongwana is just a carbon-copy of Mussolini and Hitler.

“Fascism is the stage reached after communism has proved an illusion.” -Friedrich von Hayek

@ Sensei: Nothing new indeed. They are deluding themselves that they can copy the China model. A successful communist state exploiting capitalism. NDZ let it slip that they are quite prepared to “commit class suicide” and the objective of that is to get rid of independent and entrepreneurial spirits. Covid also offered a unique opportunity to test the waters of the intended future – the command control is being thoroughly enjoyed. An added benefit is to have many self employed entrepreneurs go out of business. “Let them emigrate” is probably the maxim bandied about at their meetings. “Will will collect election funds and enough money to keep the patronage networks well oiled directly from smokers now – avoiding the need account to Treasury. That will teach those greedy corporations like BAT.”

Agreed that the politicians are loving the control that has been implemented for COVID 19 reasons. I think they are frantically thinking of ways to ensure that the crisis can be prolonged forever so that they can implement all sorts of schemes to control the economy and enrich themselves.

All the nations that defaulted on sovereign debt tried the same tricks. The ANCdoes not want to implement the structural reforms it should have before Covid-19.

There we have it right on cue. The ruling elite agenda revealed for all to see.

The first steps to take control of the approx. R7 trillion in pensions and thereafter or in tandem start to take control of the SARB.

As for entrepreneurs they are getting thinner on the ground by the day. What was the stat, something like 8-10,000 US$ millionaires closed up shop and emigrated from RSA over the last decade or so. How many people did they employ, how much did they contribute in taxes and to their peripheral economies. What was the opportunity cost lost?

You starve out the entrepreneurs and limit their earnings and ability to grow, effectively putting a glass ceiling in place and at a certain point they will say to hell with it and leave – for it is these very people we need to create the jobs and grow the economy, but the very same people are the ones that have the ability to leave, putting ever more pressure on those left behind. A self fulfilling inverse pyramid scheme. That dwindling point can only support so many people before it collapses under the growing weight of that welfare base – Zimbabwe.

Until this whole mindset is reversed i shall remain a ZAR bear and for good reason. Not to say i do not trade the rallies – but they will be ever more short lived.

What is different this time (the ZAR market action is telling us something is very wrong) – every other massive sell off in the ZAR over the last 25 years, you will notice has been a exponential blow off top, typically collapsing back within a couple of days to at least 35-50% of where it started. This time it blew off in a far more controlled manner taking a little over 3 weeks to go from high 14`s to over 19.00, 19.35 to be exact, but it did not collapse back down, as the markets all went back into full blown risk on mode, hell the NASDAQ is at a new high for 2020, as if this crash never happened. No the ZAR remained for 6 weeks at or around its low of 19.00ish, only recently has it fallen about 5-9% from its all time low.

The currency is the share price of a country and typically as in any share price, it usually starts to discount future developments through action, as insiders move the market one way or another. There have been articles here about ZAR strength recently – really, the elephant in the room is the ZAR extreme relative weakness and the fact it is consolidating at its lows. The US indices are up 40+ percent from their lows, but the ZAR can barely scrape out 9%.

This article and expected ‘revelation’ tells us what is happening behind the curtain. Pasop, as i expect we may only have a few more weeks here, then a growing nightmare and grinding ever lower into the N.Hemisphere fall period.

Believe it or not, when we do get a blow off low/ top depending on which chart you follow, that behaves as ‘it should’, it will be a good sign, in that some stability relatively speaking might be in order for several months.

Just an opinion.

A comment from Groucho Marx comes to mind….

Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.

….timeless.

The ANC is on big perpetual financial plumbing leak.

The ANC doesn’t make decisions based on their ideology anymore. It is now all about protecting their source of income. If one SOE dries up due to gross incompetence, mismanagement, patronage, and corruption, it is imperative of the ANC to create new SOE’s bound for failure and ready to plunder. Take note, I’m using the ANC and government interchangeable because there really is no difference. If this is really not the case and they truly believe it’s a great idea to use pension funds to bail out failed SOE’s and start more SOE’s, then I would suggest a large panel of neurosurgeons to investigate the extent of government brain damage, before proceeding with this “amazing” idea.

The worst combination of all – utter shamelessness + unbridled greed

Boost economy? Easy; get Gordhan to bankroll more tax money for his new SAA from the ashes…..

If I was Mboweni, I’d just walk away – nevermind bothering with a revamped budget!

What a bunch of absolute buffoons.
Stopping the R21 billion that is going to be thrown down the blackhole called SAA would be a start.
R21 billion could build a new railway from DBN to JNB. Sort out the fact that the trucks are destroying our roads…
But oh wait… then we have unions and imbeciles burning down infrastructure because they cannot and will not see the wood for the trees.

I am beginning to loose all hope for this country.
We need serious leadership and sadly, Cyril is lacking big time.

His obsession with trying to save the ANC before SA is showing and this will be his legacy.

End of comments.

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