/ 14 June 2005

Economic Erwin

You are currently re-negotiating shareholder compacts with the state-owned enterprises [SOEs].What kinds of change are you looking for?

The revised shareholders compacts focus far more on the precise economic performance we want the boards to deliver.

Our expectations of the SOEs are much tighter. What they have to achieve economically is far bigger. I would like the new model of shareholder compact to take effect at the beginning of the next financial year.

The SOEs have various projects under way in the rest of Africa. Don’t those projects strain both human and capital resources that are urgently needed in South Africa?

At the moment, you are absolutely correct. We have to seriously examine what resources we can employ in Africa, and what we need here. We are not going to go rushing around — the impact we are having in Africa is a little diffuse and fragmented at present.

We are about to announce a project in the Department of Public Enterprises that looks exactly at this question. How do we better coordinate, utilise and generate resources for our involvement in Africa. By the end of the year we hope to have proposals.

How is SAA doing?

SAA will announce its results shortly; it is back in operating profitably. Its balance sheet is stronger but will still be relatively weak because of past liabilities.

People in the tourism industry complain that SAA is too protectionist of landing slots — particularly on the London route — limiting the number of tourists arriving. Shouldn’t we just open our skies?

Not on your life. These are very profitable routes. If you don’t want a South African airline, open your skies. The big airlines will move in, murder you in competition, and then put the prices up. So as a national asset we need an airline, and it needs access to lucrative routes.

The United Kingdom government gives us slots into UK airspace, but when we want slots at Heathrow, which is owned by British Airways and Virgin, they say no. In that case, I am sorry, we don’t have any slots in Cape Town. It is just a tough negotiation.

But do the benefits of having a national airline outweigh those costs to the tourism industry?

Not all tourists come out of the UK. British Airways will never fly from South Africa to China, but SAA will, and later this year we will open routes. The net impact on tourism of having a viable, efficient global-reach airline is far greater than 5 000 tourists out of London. Clearly we’d like to reach agreement as soon as possible with the UK. But we’re not going to give away value for nothing. A viable SAA will open new tourism markets that ultimately will be far bigger than the UK.

Even if the current review of the structure of government does not suggest an economics ‘super ministry”, what are the prospects for increased central coordination of economic policy?

There are different dimensions of overall economic management. If you conflate them, there is going to be chaos. Because we are keeping the big enterprises in state hands, you do need a ministry that runs them. It is probably not wise for that to be the finance ministry, it is also not wise for it to be the trade and industry ministry — simply because the trade and industry ministry is so big.

Where do you think the planning should come from?

In the past we tended not to have a planning process, and opted instead for the Reconstruction and Develoment Programme document as our guideline. We are now at the point where we ask the question: Should there not be a more precise overall economic planning function?

Do you put that with your powerful Ministry of Finance?

There are advantages to that, because we have fantastic expertise in the Finance Ministry, and we’ve got a fantastic finance minister. There are also disadvantages because there is sometimes a bit of tension between the funding and the planning.

What role is the Department of Public Enterprises expected to play in industrial policy?

The department must be familiar with government’s industrial strategy, and clearly the president, when he makes moves, chooses people that have relevant experience. He’s taken a trade and industry minister [to handle the public enterprises portfolio].

Experience allows us to focus on areas we know to be critically important, so your Public Enterprises Ministry is not just managing these things from the point of view of bottom line profitability, it is managing them as strategic instruments to grow the economy.

But is it the job of the department to ‘pick winners” in the economy?

Our industrial policy is much more coherent and flexible than that. You’ve got to strengthen your key levers of modern manufacturing: IT, logistics, skills, driving for beneficiation, hunting for projects to integrate you into the world economy.

The Airbus A400M [military transport aircraft manufacturing programme] is something public enterprises went and pushed hard for, because we knew it integrated with the department of trade and industry’s aerospace strategy.

Maria Ramos has been cautious about expectations of a quick turn-around at Transnet, but you have said things are improving rapidly.

We agree on that. You don’t turn around anywhere between R9- and R20-billion companies overnight, so she’s absolutely right.

Where things are going well is in the redesign of those companies, getting them to be absolutely focused on their core competencies and nothing else.