Source: South Africa’s economic chief hints at privatization drive
A key figure in charge of South Africa’s economy has hinted at his appetite for privatizing the country’s ailing state-owned enterprises (SOEs).
“Why not?” responded National Treasury Director General Dondo Mogajane, when asked by Reuters Saturday if it was possible for segments of South Africa’s publicly-owned firms to be sold.
“There have to be new ways of looking at these things. Are we talking privatization? Are we talking equity partnership? Let’s give an opportunity for new ministers to unpack what it means,” he added.
New South African President Cyril Ramaphosa
, as part of his drive to revive the economy and stymie corruption, has spoken of reforming the country’s more than 700 state-owned enterprises. These include utility firm Eskom, which provides most of the country’s electricity, and South African Airways, both of which are loss-making.
“We will need to confront the reality that the challenges at some of our SOEs are structural,” Ramaphosa said in his debut State of the Nation address in February. “SOEs cannot borrow their way out of their financial difficulties,” he added.
Ramaphosa appointed two-time former Finance Minister Pravin Gordhan to head up the Department of Public Enterprises in Februry. Gordhan is known for his tough stance on graft.
But, genuine reform to South Africa’s state-owned enterprises could provide difficult. “The main constraint is ANC (African National Congress) policy,” Francois Conradie, head of research at South Africa-based NKC African Economics, told CNBC via e-mail.
“In December the party did not vote for any change in its philosophy on SOEs, which it has historically seen as a key focus for state-led transformation and thus not an area of the economy that it is prepared to subject to market forces.”
“We think the resistance from the ANC and its partners, just over a year from the national election, will make swift action impossible,” Conradie added.
The South African economy, which has recently shown tentative green shoots, saw more good news on Friday as ratings agency Moody’s held the country’s investment-grade credit rating and revised its credit outlook to “stable” from “negative.” The decision cited improving growth prospects and the stabilizing of South Africa’s institutions.
“The confirmation of South Africa’s ratings reflects Moody’s view that the previous weakening of South Africa’s institutions will gradually reverse under a more transparent and predictable policy framework,” said Moody’s in a corresponding statement.
South Africa’s economy grew by an unexpected 3.1 percent during the fourth quarter of 2017. This pushed annual growth for the year to 1.3 percent, ahead of the anticipated 1 percent. Unemployment also fell quarter-on-quarter by 1 percent to 26.7 percent.