Mboweni’s plan for saving SA faces labour opposition

South African Finance Minister Tito Mboweni’s most contentious proposals for reviving the economy encountered opposition at a meeting of the ruling African National Congress’s top leadership and further talks are planned, according to people familiar with the discussions.

Labour union and South African Communist Party officials who sit on the ANC’s National Executive Committee were especially critical of Mboweni’s suggestion that state utility Eskom sell some power plants because they were worried about job losses, said the people, who asked not to be identified because they aren’t authorised to comment.

The government is seeking to speed up reforms as business confidence slides and criticism grows amid weak economic growth. While Mboweni may not succeed in winning approval for all his proposals, the urgent need for a plan could mean at least some of them find easier passage.

While there was general acceptance at the ANC meeting in Benoni near Johannesburg over the weekend that Eskom needs to be financially and operationally sustainable and further cost cuts are necessary, delegates wanted more engagement about time frames and processes, they said.

Eskom, which supplies about 95% of South Africa’s electricity, is buckling under R450 billion ($30 billion) of debt and relies on government bailouts to remain solvent. Mboweni’s economic revival plan, details of which was released August 27, suggested that the entire debt could be settled by selling off coal-fired power stations.

Mboweni’s other proposals, which were tabled at the ANC meeting, include that the state relinquish its near monopoly over the provision of electricity, port and rail services, relax rules to make it easier to do business and privatise other assets to stabilise its finances. He also favours maintaining a flexible exchange rate, inflation targeting and sustainable fiscal policy.

The labour union and communist party officials complained that the plan didn’t address macro-economic issues, such as the role of the central bank — a shortcoming President Cyril Ramaphosa said would be addressed, the people said.

The ANC is scheduled to brief the media on the outcomes of the NEC meeting on October 2. The party has ruled South Africa since white-minority rule ended in 1994 in alliance with the communist party and the Congress of South African Trade Unions, the country’s largest labour group.

© 2019 Bloomberg L.P.

Source: moneyweb.co.za