CEO Initiative on 14-point rescue: one Gigaba does not a government make
Business leader Jabu Mabuza has thrown down the gauntlet to cabinet ministers to back Finance Minister Malusi Gigaba in implementing the government's 14-point short-term growth plan - but there is doubt if the plan will be sufficient to boost economic growth.
Mabuza, who is chairman of the CEO Initiative, said on Friday while the plan "talks good things" a major issue was that the ministers of various departments "should make this commitment and come out and say I will do this".
"My criticism is these are all policy positions that we are all aware of ... what we need is a better demonstration of a co-ordinated approach by government, not by a minister," said Mabuza, who also chairs Business Leadership South Africa. Business was happy with the progress it had seen from Gigaba, he said, "but we cannot say we're seeing the same from the other ministers".
"Talk about Eskom. [Gigaba] is the person who must fund it, but what is the minister of energy saying about the things that need to be done? What is the minister of public enterprises saying about the work that needs to be done?"
He added that the government's action plan announced on Thursday - which suggested private participation in state companies among other things - had to be followed up with a better co-ordinated plan.
The success of this plan will require government's co-operation from the private sector, with which it still has a fragile relationship following the firing of former finance minister Pravin Gordhan and his deputy Mcebisi Jonas in March. Business is still licking its wounds after the cabinet reshuffle immediately resulted in the downgrade of South Africa's foreign-currency credit rating to junk, a consequence that business and Gordhan had worked for months to avoid.
Mabuza said the plan came against the backdrop of "very damaged trust" between business and the government, in particular President Jacob Zuma, but he said Gigaba had consulted business on several occasions recently. Gigaba had requested that business highlight issues in various sectors that needed to be addressed and possible solutions.
"So we have given him input. When he came out with his 14-point plan, it was against that backdrop."
The economy is in the grip of a recession, unemployment has risen, there are concerns that tax revenues will dip and that the country will not even achieve 1% economic growth this year.
The plan's proposals range from the development of a case for "soft support" for Eskom until the next tariff adjustment in 2018; the recapitalisation of SAA and the Post Office by August; and the development of a private sector participation framework, led by Gigaba this month.
Gigaba said that at the medium-term budget policy statement in October "we will be able to more comprehensively speak to our economic outlook and growth prospects.
"It is critical that we go into the [budget] having demonstrated progress in unlocking growth."
But confidence from consumers and business was still required, Mabuza said. "For [Gigaba's] part, for the part that he's got control and executive responsibility for, we have seen nothing but a demonstration that he can do it and he's got the will and he's been saying the right things. He needs to be supported in as far as that is concerned."
Elna Moolman, economist at Macquarie Group, said the firm and relatively short deadlines were "most encouraging". However, few of the interventions were new and might not be sufficient to lift economic growth or "specifically address the key prevailing growth constraints", she said.
Moolman said the government should prioritise problems at state-owned enterprises that "repeatedly put significant pressure on the fiscus and policy certainty".
Econometrix economist Azar Jammine said the plan appeared to placate concerns raised by ratings agencies over the past two years. This included continued slow growth, rising government debt, the risk that increasing contingent liabilities at SOEs presented, policy uncertainty and low business and consumer confidence.
By the next round of ratings reviews in November, Jammine said, it would still be too early to assess the effectiveness of the plan, which "buys a bit of time" for the country.
"Gigaba has got the message and he is doing all he can now to stave off a further credit-ratings downgrade." But Jammine added: "The big elephant in the room is can you really generate more business and consumer confidence as long as Zuma remains leader of South Africa's ruling party? The answer is no ... We wouldn't have been in this dilemma had it not been for the fact that Zuma engaged on that cabinet reshuffle."
It was essential that a comprehensive programme to address state capture and rising corruption was implemented, without which the economy might not realise higher than the 3% growth that was necessary, he said.
Ravi Bhatia, an S&P Global Ratings director, said: "We will wait and watch the measures to see whether they deliver tangible results in terms of improved GDP growth."
Moody's and Fitch Ratings declined to comment at this stage.
Last month in a report, Fitch lowered South Africa's GDP forecast to 0.6% from its March prediction of 1.2% and warned that policy uncertainty "would continue to weigh on the willingness" of business to invest, at least until the ANC's electoral conference in December.