Finance Minister Malusi Gigaba says drastic steps are needed to help South Africa’s ailing economy – including freezing senior civil servants’ salaries and selling chunks of state-owned enterprises.
In an exclusive interview with City Press on Friday, Gigaba unveiled the surprise moves, which include slamming brakes on the country’s estimated R1 trillion nuclear build programme, saying it is neither affordable nor currently necessary.
“There was a time when it was felt that nuclear is necessary and it must be implemented and programmes were started. But it became clear, as the economy took a serious dip, that we were not going to afford nuclear, that the country couldn’t afford it and the budget couldn’t afford it,” he said.
“It is quite clear that, at present, we can meet our electricity needs and we can even meet them into the future, given the excess electricity that we have.”
Nuclear power, Gigaba said, will remain part of the country’s energy mix. However, this will only happen when the economy is growing fast, when there is “high uptake of electricity from intensive users, when we can see that we are reaching the stage where existing capacity is being fully utilised and the demand and supply margin is very narrow”.
Gigaba said it was not a “malicious view” to shelve the nuclear programme for now, considering the R50bn budget shortfall, a rising budget deficit, National Health Insurance, demands for free higher education, and a national debt to GDP ratio which is set to breach the 60% threshold by 2022.
“If you look at Eskom’s balance sheet, they will not be able to afford nuclear, they will need a guarantee from government. Government guarantees are ultimately state debt, because when a state-owned company cannot afford to pay the guarantees, the national fiscus needs to step in and pay. That is what happened at SAA,” he said.
In the wide-ranging interview, Gigaba:
– Said he is considering freezing the salaries of senior civil servants from middle management upwards;
– Unveiled plans to sell off shares in government companies to raise money;
– Said he is reviewing the government guarantee framework policy and will stop dishing out such guarantees;
– Distanced himself from the Gupta family, saying they are not his friends and that he has “never discussed anything with them”;
– Announced the consolidation of SAA, SA Express and budget airline Mango into one company, with a single CEO and board; and
– Denied establishing a parallel administration which bypasses director-general Dondo Mogajane.
SWEEPING CHANGES AT SOEs
Gigaba said the days of government executives running down SOEs believing that government will recapitalise them are over.
“It cannot be. SOEs must be run as businesses,” he said, adding that Treasury has agreed to private sector participation for all government companies.
READ: No more Mr Nice Guy: Gigaba gets tough on state-owned entities
“Obviously, it won’t apply universally. We need to look at each entity and determine the extent to which such private sector participation could add value. At SAA, a minority strategic partnership is required. At which other SOEs can we do that? That is the work that the SOE reform committee is busy with.
“The disposal of noncore assets will not be universal. We need to look at every SOE, including Eskom, Transnet, Prasa, the SA National Roads Agency Limited, and decide which assets we can dispose of to raise money and improve efficiencies.”
There will be no more government guarantees at SOEs for operational expenditure and waste. It is time SOE executives justify their high salaries by delivering value for government, he said.
THE R50BN HOLE
While the R50bn shortfall Gigaba announced during his Medium-term Budget Policy Statement in Parliament on Wednesday is due to the stagnating economy, he said it was as much a result of bad management at the SA Revenue Service (SARS).
“Because of the underperforming economy, you have seen a large gap developing in tax compliance. But we would be disingenuous not to admit that there are tax administration challenges at SARS. We are discussing this, and a lack of skills in crucial places, with the commissioner,” he said.
READ: Look into SARS, MPs tell Gigaba amid glaring tax shortfall
Following years of fiscal consolidation and cost-cutting measures, such as reducing catering, travel and accommodation, Treasury had nowhere else to cut, resulting in the R50bn shortfall. He said he was not sitting and doing nothing about it.
“We are considering a range of issues, including freezing salaries, not raising salaries of executives at national and provincial government and for MPs and top civil servants.
“The hole is now big, so we need to look carefully at what we can do and we are not afraid of taking hard decisions. We will continue with fiscal consolidation.”
The presidential fiscal committee, which Gigaba announced on Thursday, is finalising cost-cutting measures which will be presented to Cabinet for approval. They will look at programmes which need to be cancelled due to non-performance, or delayed.
THE ELEPHANT IN THE ROOM
Gigaba was cited in the report Betrayal of the Promise: The Anatomy of State Capture as having played a key role in state capture when he was minister of public enterprises. However, he distanced himself from the Gupta family.
“You cannot predict that somebody is doing wrong if you don’t know. Many people have met them and I have met them on many occasions. It doesn’t mean there is any business I was doing with them. I never discussed any of my work with them. I met them, I would have gone to The New Age breakfasts.
“In the past I was invited to a few Diwali celebrations. But that was that. They are not my friends, and there is nothing that I discuss with them right now.”
He said he was independent and not beholden to the controversial family.
“My responsibility is to the country. My loyalty is to the country and my allegiance is to the country and my movement. I can assure everyone that whatever decisions I take, it is not at the insistence of anybody pressuring me, but as a result of what has to be done. My track record speaks for itself.”
Gigaba said the ANC’s presidential candidates could make his job much easier by addressing investors’ fears about the future of the economy.
“As finance minister, I think we need to have all contestants providing an assurance to investors and ratings agencies about what they stand for and showing us more of their personalities, rather than less.”
He said the ANC presidential candidates are being too careful and keeping their cards too close to their chest.
“Perhaps after nominations, when we know who is who, it will give us a greater chance to try and expose the contestants more to investors and send the message: ‘do not fear these people’.[Source: News24]