After languishing for several years in the realm of policy, micro-economic reform is front-and-centre in the government’s programme of action.
Minister of Public Enterprises Alec Erwin may miss this month’s deadline for announcing the infrastructure investment plans of parastatals, but he and his colleagues in the Cabinet economics cluster are due to make numerous other announcements on logistics, input prices, enterprise development, black economic empowerment and regulatory coordination.
The most striking bit of progress so far comes, to the unanimous surprise and delight of analysts and industry figures, from the Ministry of Communications.
The spectacular ”big-bang” liberalisation of telecommunications announced by Minister Ivy Matsepe-Casaburri last week was in sharp contrast to the managed approach to deregulation, which has previously characterised the government’s approach to unwinding apartheid-era economic legislation, but officials now say the issue of telecoms prices is ”pretty much dealt with”.
Senior officials say last week’s move was not scripted by the Presidency, suggesting instead that the communications department has been working much better since the departure of Andile Ngcaba, whose tenure as director general was marked by several flawed pieces of legislation, and the chaotic process around the licensing of the second network operator.
There is no doubt, however, that the emphasis on decreasing the cost of key economic inputs coming from the Cabinet formed the basis for the decision.
”They understood that decreasing the cost of doing business is more important than revenues coming in to government,” one official in the Presidency told the Mail & Guardian.
This attitude will also inform the government’s response to a report on the pricing policies of parastatals submitted to the Cabinet by the Department of Public Enterprises last month, and investigation into import parity pricing currently under way at the Department of Trade and Industry, he said.
In a liberalised telecoms market it will be up to competition to drive prices down, and Eskom already sells some of the world’s cheapest electricity. But Transnet will be trickier.
Mining and steel companies may be at war over the pricing of steel, but they are unified in their criticism of rapidly escalating tariffs and poor service from Spoornet, which they say severely hamper their export performance.
Public enterprises Director General and co-chairperson of the Cabinet economics cluster Eugene Mokeyane says that while parastatals need to be profitable, they shouldn’t make an ”inordinate profit” and this will inform the government’s approach to pricing.
”We are going to look closely at projects’ internal rate of return and issue guidelines to the boards of state-owned enterprises,” he says.
According to the programme of action, Erwin is due to announce ”the detailed and enhanced investment plans of state-owned enterprises” (SOEs) this month, a deadline Mokeyane says will not be met.
Plans have been received from Eskom, Transnet and Denel, as well as telecoms and water companies, and meetings with their chief executives will take place next week.
”We are looking at the coordination of investment and staggering access to the capital markets so that the macro-economic impact is managed,” Mokeyane says.
Privatisation at Transnet and Denel is very much back on the agenda following the announcement of massive losses at both companies. But it is not yet clear whether the proceeds from the sale of assets will go to infrastructure investment through their parent companies, or be used to shore up wobbly balance sheets, or revert to the fiscus.
Mokeyane says the issue is currently being debated, but it is too soon to say what the outcome will be.
A comprehensive logistical strategy is due in the Cabinet by November. It is likely to refer to public-private partnerships as a key source of funding, and Minister of Transport Jeff Radebe has repeatedly intimated that the subsidy system for public transport will be redesigned.
But Ramos is unlikely to have recourse to subsidies. She will have to conjure reasonable prices, capacity improvements and commercial stability out of a recalcitrant Transnet.
A number of allegations, centering on the claim that Ramos had approved disastrous hedging decisions at SAA and Spoornet while she was at the National Treasury, have been floated by angry former executives over the past two weeks.
Mokeyane says: ”Transnet will be turned around, including its culture; in fact it is a precursor of what will happen at other SOEs.”
Unions are worried about layoffs, however, and they have not been won over by plans for increased spending.
Moreover, they are still unhappy with the role of liberal economic principles in the economic reform strategy.
Congress of South African Trade Unions economist Neva Makgetla says plans to integrate the formal and informal economies will not work while there is an inadequate focus on job creation in the formal sector.
”Look at the free-trade agreement with China, for example. We have had a trade deficit with China since 1994 and when we do export to them it will be heavy industry, not labour intensive manufacturing. Unless the driving force of the economy is restructured all this focus on implementation won’t work,” she argues.
The Department of Trade and Industry has a good deal more on its plate than trade — its traditional strong suit. Mandisi Mpahlwa is an expert in enterprise finance and he is expected to repair a thoroughly ineffective system of state funding.
He is not having an easy time of it. The National Empowerment Fund continues to flounder, with the suspension of CEO Sydney Maree following just weeks after the long-delayed announcement of its new products at the end of April.
The Enterprise Development Bill is due in Cabinet this month, a report on import parity pricing is scheduled for November, and the Apex micro-finance fund is to be launched in December.
The government’s big job creation initiative, the expanded public works programme, aims to create one million temporary jobs and provide skills training over the next five years.
This flagship programme has been entrusted to the Department of Public Works, which is described by some observers as being moribund. However, the programme has already been launched in two provinces, and the other seven have until the end of this month to begin rolling out labour intensive infrastructure projects.