JOHANNESBURG, Feb 20, 2019 (BSS/AFP) – South Africa’s Finance Minister
Tito Mboweni faces a balancing act ahead of his maiden budget Wednesday to
reassure investors over the country’s troubled public electricity company
without alienating union allies ahead of national elections.
He is under pressure to bail out the state power utility Eskom — along
with its $30 billion mountain of debt — which is at the centre of the
country’s mounting economic troubles.
Mboweni will deliver his maiden budget to parliament in Cape Town at 1200
GMT.
Analysts warn of tensions that may emerge should the restructuring lead to
job losses.
President Cyril Ramaphosa announced this month that the utility would be
divided into three, but unions have rejected that, saying it would lead to
job cuts.
Over the past few weeks the utility has implemented a nationwide programme
of rolling blackouts as it failed to meet demand.
The scale of the power outages, unseen in more than a decade, has rocked
the continent’s most industrialised nation, plunging businesses, homes and
traffic lights into darkness.
But the ruling African National Congress (ANC) has been warned by its
coalition partner, the COSATU trade union federation, that sackings could
damage their alliance ahead of national elections due on May 8.
“We remain totally opposed to any restructuring plan that will benefit the
capitalist class and increase prices for the working class,” said spokesman
Sizwe Pamla.
Ramaphosa indicated last week that details of the government’s rescue
plan, which will be designed to stave off another damaging credit rating
downgrade, would be revealed in Wednesday’s budget.
Fears are mounting that if Eskom defaults on its massive debts, lenders
would be entitled to call back other loans to different parts of the state
including the troubled national carrier South African Airways.
Fraud, corruption and incompetence have gripped public sector businesses
and compromised their credibility while mounting debts have spooked
investors.
– High unemployment and debt –
“It has become clear that Eskom’s coal-heavy system is now a dangerous
impediment to sustainable growth in South Africa,” said Jesse Burton, a
researcher at the University of Cape Town’s Energy Research Centre.
Mzukisi Qobo, an associate professor at Wits Business School, said Mboweni
would likely announce steps “towards eliminating wastage in government and
offer a clue on whether government intends to increase taxes”.
Several taxes including VAT as well as levies on fuel and alcohol were
hiked last year in an effort to raise 36 billion rand ($2.5 billion) to plug
gaps in receipts at the tax collector.
Mboweni, who replaced former finance minister Nhlanhla Nene when he was
forced to resign over meetings with the scandal-tainted Gupta brothers, took
office in October.
His speech is also expected to address the country’s stubborn 27 percent
unemployment rate as well as the overall sluggish economy which only returned
to growth in December following a recession.
Net debt currently stands at around 2.28 trillion rand ($160 billion), or
48.6 percent of GDP, according to the treasury.
Michael Sachs, an economist at Wits University, said the government was
being forced to borrow more to service its debts, creating a dangerous cycle.
He called for “an executive with clear and effective policies, that makes
trade-offs, confronts those trade-offs and mobilises society behind those
solutions”.
“Whether we will get there after the election, I am not sure,” he added.
Ramaphosa will be hoping Mboweni’s speech treads a fine enough line to
help him win a sixth term for the ANC, in power since the dawn of democracy
in the country in 1994.