Fixing the economy a long, hard haul, Ramaphosa says

President Cyril Ramaphosa said his administration’s drive to turn the economy around will be protracted and is being frustrated by the rapid spread of the coronavirus around the globe and other factors beyond its control.

“These are trying and testing times,” Ramaphosa said at a two-hour briefing to journalists in Cape Town on Tuesday. “I like to believe that we have entered an era where there is no longer any objection to reforms and transformation. We are going to reform. As this moves, we will be repositioning our economy for further investments.”

The economy has twice slipped into recession since Ramaphosa took office in February 2018, highlighting the challenges he faces in trying to undo the misrule and graft that characterised his predecessor Jacob Zuma’s nine-year tenure. GDP shrank at an annualised 1.4% in the last quarter of 2019, and expanded just 0.2% for the full year, the slowest pace since the global financial crisis, the national statistics agency said on Tuesday.

While the data is “not pleasing”, it’s not surprising given the country’s contending with power shortages, drought and low levels of consumer and business confidence, Ramaphosa said. South Africa has yet to have a confirmed case of the coronavirus, but the president expects it to have a “huge, huge impact” on the global economy, with a negative knock-on effect domestically.

Ramaphosa repeated reassurances that the government will fix the debt-stricken Eskom, which supplies about 95% of the nation’s power, and restructure the energy industry to ensure private producers played a bigger role. Consideration should be given to selling some of Eskom’s older power plants to private investors who could operate them more effectively, he said.

‘Quite compelling’

“Our power generation has now entered a new era, a new era that should not be driven by ideology, but by pragmatism,” he said.

Ramaphosa described a plan proposed by Cosatu, the country’s biggest labour group, for pension funds to either assume part of Eskom’s R456-billion in debt or take a stake in the company, as “quite compelling”, but said final details still needed to be worked out.

Cosatu wants the government to underwrite any losses incurred by pensioners and the implications that would have for the nation’s finances would have to be worked out, he said.  — Reported by Mike Cohen and Paul Vecchiatto, with assistance from Rene Vollgraaff, (c) 2020 Bloomberg LP