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The new era has begun, and the stakes are high

Ramaphosa is under pressure to turn the economy around, and he’s going to need all the help he can get.
There can be no holy cows, no ‘untouchabes’ … President Cyril Ramaphosa needs to surround himself with people who will put South Africa first. Picture: Elmond Jiyane, GCIS

In the face of a sluggish economy expected to grow by just over 1% this year and growing unemployment, President Cyril Ramaphosa hasn’t missed an opportunity to state that his priorities for the next five years centre on stimulating economic growth.

With the elections behind us, Ramaphosa is expected to get to work implementing the reforms that will turn the country’s economy around. The economy is expected to have contracted sharply in the first quarter of the year.

Ramaphosa has already received the backing of the investment community, with New York-based bank Goldman Sachs promptly endorsing his victory. At a panel discussion on foreign investment this week, the bank’s sub-Saharan Africa head Colin Coleman said the country was “fortunate” to have someone of Ramaphosa’s stature and who has a clear vision of where he wants the country to go.

Coleman says Ramaphosa’s victory lays the foundation for an increased focus on economic growth but that there will be “no easy wins”.

The population is growing at 1.5% while the economy is expected to grow by between 1.2% and 1.5% this year. “Which is very poor,” says Coleman.

He believes that while the country should be able to get growth up to 2.5% by “just doing the basics”, it will be more difficult to get back to the average 4% growth rate seen during former president Thabo Mbeki’s administration.

Ramaphosa, who is set to announce his cabinet in the next few weeks, will be monitored closely by investors and multinationals who expect to see a new administration that is clean, capable and not “bent towards patronage,” as Coleman puts it.

Eskom needs to be immunised

The biggest threat to the economy is Eskom, and Ramaphosa will need help from every sphere in the country.

He has to immunise Eskom and ensure that it does not default, creating a cross-default that leads to a financial and economic crisis in South Africa which will lead to a recession and high cost of living as interest rates rise,” says economist Lumkile Mondi.

Eskom has over R400 billion in debt and is not expected to generate enough money to pay all of its maturing financial obligations over the next five years.

Rating agency Moody’s has warned that if government does not live up to the fiscal consolidation and policy reform decisions made in 2018, South Africa’s debt could rise to over 70% of GDP by 2023.

The rating agency now includes Eskom’s government-guaranteed debt in its assessment of the nation’s fiscal situation after the utility proved that it was unable to service its debt, forcing the state to release emergency funds to prevent it from defaulting on its liabilities.

Striking fact

Moody’s analyst Lucie Villa says that what is striking about South Africa when compared to its emerging market peers is that its economic growth is not only low, but is slowing.

Speaking to Moneyweb, Villa added that while the country’s debt-to-GDP levels are currently in line with those of its Baa3-rated peers, the main difference lies in the trajectory.

She says that without policy transformation, South Africa’s prospects will edge closer to those of Morocco, which is rated at Ba1.

Moody’s is the only major rating agency that has not junked South Africa’s foreign debt, placing the country on a stable outlook. A Ba1 rating is the first level of junk status on Moody’s non-investment scale.

“This gives you an idea of [the fact] that if there is no effective response on the part of the authorities, [that is] where we would go,” says Villa.

Read: SA’s debt surge must stop – Moody’s

Moody’s was expected to release a credit rating report on South Africa’s bonds in March but postponed the announcement to November.

Mondi says Ramaphosa will have to ensure that there is a buy-in from all sectors of society regarding how Eskom is going to be fixed. “That will include the shedding of labour and a social plan of [the] communities that [owe] Eskom billions of rands.”

Growth plan

This will make it easier for Ramaphosa to focus on the growth plan, says Mondi.

However, the state’s plan to restructure Eskom into three separate entities met with opposition from unions who said it would result in job losses – and Ramaphosa reassured labour that there would be no job losses as it restructures Eskom.

“When we are restructuring there should be no holy cows,” says Mondi.

“All of us are in this together and all of us are going to have to take the pain.”

He says the country will be worse off if it fails in this.

“Really, the stakes are very high,” he adds.

Read: Eskom yields near 2018 low as Moody’s plan spurs bailout talk

The growth strategy for South Africa will be informed by Ramaphosa’s cabinet. For Mondi the key characteristics of Ramaphosa’s cabinet are that it be professional and capable. This includes selecting two people from outside the ANC alliance.

“Those two people, hopefully, they will be the ones that will strengthen the economic cluster and bring in capability and expertise to drive key investments and the growth agenda,” said Mondi.

The test for South Africa in the so-called ‘new dawn’ will be the composition of that cabinet. “We need people that are going to put South Africa first,” says Mondi.

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A good place to start would be for him to appeal to his comrade cadres to lighten up on the looting and try to do some constructive work towards adding to the GDP. At least to try and cut rampant costs they are responsible for. This might encourage ordinary citizens who have been skinned of billions in taxes which have not gone near the economy nor its needy citizens as it should have. See if Looter House can set the example. Some may even consider coming clean in exchange for clemency. Nah. You’re right. Never going to happen.

In previous times, the Economy went to the ICU and responded, people believed and tried again.

The Economy has been to the ICU too many times now, this time it is not leaving the ICU.

Too much looting, VBS, Eskom and the Zuma team.

The shopping malls are empty, the JSE is at a five year low, people and companies are emigrating.

237,000 jobs lost in Q1 for 2019.

Abolish BEE, the very thing which made Cyril stinking rich and there may be some hope but that would be killing his golden goose. Does he have the balls?

Its a big ask and Ramaphosa will have to be the first to show his cards by getting the right people into the positions of power and getting the NPA to send some of the BIG looters (can get Markus to join them) to jail quickly. Business and capital has lost complete trust in the ANC as a credible organisation and this needs to be restored by the ANC first. Get that right and everyone starts pulling in the same direction to create growth…we don’t have to like each-other but at least we all want the same thing…prosperity, jobs, service delivery. Fact; 25% of the top people who left a business last year we interact with …..emigrated. Huge loss of skill and job creation ability.

While GS s views should be respected Mr Coleman has a track record of calling most issues incorrectly largely due to his unholy allegiance to the ANC. I wouldn’t take his views seriously at all.

An endorsement from Goldman Sachs doesn’t inspire confidence – if any firm is opportunistic it’s this one – particularly in the mining sector – in my opinion! . Perhaps they are the ones pointing out gold is not dead in SA and are hustling for a slice of the action!
Anyway, the bottom line is CR is going to have to make things happen and he deserves our support and encouragement. The new appointee as head of Transnet announced this morning is a very good start. Hopefully this heralds the end of racist and divisive BEE policies and appointments? We hold thumbs in this regard, but this is a good start.

Ok I’m prepared to let my actions speak louder than my mouth. Allow me access to SARS and the liquidation industry and I’ll do stuff that will save the country literally Billions. I only need to focus on these two issues. This is a once-only offer…

Thanks Tebogo
My take would be to give the President an opportunity to unfold his strategy. However this support would be how the following unfolds in the next 6-12 months:-
1/ The new cabinet must be cut in half and the ministers appointed should be free from the corruption stain and should be strong leaders with a voice capable of surrounding themselves with competent and capable advisors;
2/ Fast track the prosecution of all the corrupt politicians like Ace and the Corporate cockroaches like Marcus to demonstrate to all South Africans that corruption has no place in South Africa;
3/ Unleash a business friendly culture that supports SMME growth and development. The greatest opportunity for SMME growth is through technology as it has the greatest power to disrupt. This business friendly culture should look to creating and unlocking opportunities for SMME’s not the consultants;
4/ We need to create a culture of excellence where excellence is rewarded. To many young people who have excelled at university and in their early careers are being stymied and don’t see a way forward and are leaving in droves
5/ Cut out all rhetoric. It does not create jobs or prosperity

CR still has the inflexible labour laws and trade unions against him that won’t budge.
ESKOM losing revenue to renewables at a rate of knots and expected to pay its debts in its own created over bloated set up with no austerity measures.
SA is too complex to save in a short time.

He is only one person. This myopic view of South Africans that think one person can fix structural problems that have existed for decades is wishful thinking of the highest order. The “personality cult” of the politicians in this country, (see zuma as well) is a huge part of our problem as a country.

In the year and bit that Cyril has been in charge, he’s basically been keeping the seat warm. The looting continued, load shedding got worse. Everywhere you go now there is a veritable army of weeds marching along every road side, mixed with lots of litter. Drains have trees growing out of them. When a miracle happens and a pothole is repaired, the work is shoddy and excavated rubble is left on the side of the road for archaeologists to find in the future. Robots now ‘break’ and stay broken for months – tweeting the respective department only results in a reply that places the blame on someone else’s shoulders. The roads are totally lawless with Taxi’s and some government flunky with his blue light on racing down the emergency lane. Cyril has become disconnected with the reality that is SA today after his BFF Zuma tried to loot SA in Russian slavery [if you think nuclear is the way to go, do yourself a favour and watch a show called Chernobyl]. NOT ONE Zuma flunky is in jail, NOT ONE Gupta is in jail. Even if you write a thousand page novel and prove how corrupt someone is, they don’t even get arrested. The light at the and the end of the tunnel – has been load shedded. I am curious to see what will come out of the new cabinet reshuffle, but with people like butter brain dlamini,loose wheel gigaba and the other 3, I will need something that is just duct tape on the crack, and

Sounds good mr president, but please show us the results.

End of comments.





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