SOUTH Africa’s Minerals Council lauded finance minister, Tito Mboweni’s medium term budget policy statement delivered in Parliament yesterday saying it was earnest in outlining the challenges faced by the country’s economy.
It also welcomed the finance ministry’s decision to delay implementation of the proposed carbon tax and comments, reported in Miningmx, that the walls that exist between private and public sectors ought to be “demolished”.
“Possibly the most heartening fact of the statement is that it was delivered with honesty and frankness about the depth of the economic crisis in which South Africa finds itself at this point, and with no attempt to gloss over the challenges,” the council said.
The government now expects the economy to grow 0.7% in 2018, compared with the 1.5% prediction that was presented by former finance minister Malusi Gigaba in February. Gross domestic product growth expected to reach 2.3% in 2021.
“Particularly interesting is his talk about the reconfiguration of state-owned enterprises, and the breaking down of walls between the public and private sectors. We await the detail of what this might mean. It is possible that government is being pressed into considering the adoption of radical measures that it has previously been reluctant to adopt.”
Mboweni said yesterday that in order to reconfigure state-owned companies such as Eskom, the government would look at how they operated. “Our current challenges with state-owned companies present an opportunity to demolish the walls that exist between the private and public sectors,” he said.
Eskom is struggling with high debt. As of March 30, it totalled R399bn of which R16bn was owed by defaulting municipalities. The group lost R2.3bn for the 2018 financial year whilst its core electricity business lost just over R4bn. Eskom recently applied for a 15% electricity tariff hike for the next three years, beginning 2019-2020 even though electricity prices have increased 350% since 2007 versus inflation of 75% over the same period.
Eskom’s critics have frequently theorised whether it might be better to privatise portions of the utility – a suggestion that has been stoutly resisted by government. On taking up the position of chairmanship of Eskom in January, Jabu Mabuza discouraged any talk of privatisation, but he did mention the overhaul of the organisation’s capital structure.
“We know what words like pritivisation do to the social and economic landscape. Let’s not go there,” he said in January.
“I have no list of assets to sell. I have a mandate to look at the capital structure and then we will go to the shareholder [the government via the Department of Public Enterprises]. Then the shareholder is given the option: you pay (equity injection), you borrow, you steal, you sell … It’s up to you. We have to say, this [solution] has got this demerit, this has got another,” he said.
The Minerals Council said it noted with interest a commitment to align the carbon budgeting system and the carbon tax, as well as the delay in implementation of the carbon tax. “That is a necessary step,” it said. “We look forward to seeing the detail of the changes.”
According to previous Minerals Council estimates, had the carbon tax as proposed been implemented in 2016, it would have resulted in a R4bn output reduction, the loss of 5,292 jobs and a reduction investment totalling some R2.2bn.
