ANC gives partial approval to Mboweni’s economic blueprint

After leaving Finance Minister Tito Mboweni hung out to dry and exposed to fierce criticism from labour circles over his wide-ranging economic growth strategy document, the ANC National Executive Committee (NEC) has partly backed him.

On Wednesday 2 October, the ANC threw its weight behind Mboweni’s surprise strategy document, saying it is part of earlier adopted but yet-to-be implemented plans for economic recovery including the National Development Plan (NDP) and President Cyril Ramaphosa’s stimulus package announced in 2018.

The ANC’s economic transformation committee head, Enoch Godongwana, said several features of Mboweni’s strategy document have been adopted by the party’s NEC. But the document has not been adopted in its entirety.

The strategic document, which was released by National Treasury for public comment on 27 August, is not a Cabinet document but merely a policy paper that draws on the NDP, a policy adopted by Parliament in 2012.

Members of the NEC, the highest decision-making body between the party’s conferences, were briefing the media on the outcome of its meetings, which started on Friday 27 September in Boksburg.

Among the thorny issue that scuppered the entire adoption of the document by the NEC was a section dealing with labour market reforms and the urgent restructuring of Eskom.

Mboweni’s document has faced major opposition from Cosatu and the SACP because they were not consulted on it and they rejected its labour reform reassures. And the ANC has bowed to union pressure.

“There are some elements we have not adopted because we believe they belong elsewhere,” said Godongwana.

“In our NEC statement on plans for economic recovery, we have not referred to labour market reforms that were contained in Mboweni’s paper. We agreed with unions that this matter should be dealt with at Nedlac.”

He told Business Maverick on the sidelines of the briefing that one of the labour market reforms rejected by trade unions involved the national minimum wage.

The document, titled Economic Transformation, Inclusive Growth, and Competitiveness: Towards an Economic Strategy for South Africa, warned that the introduction of the national minimum wage in January 2019 could “potentially have an adverse effect on small businesses who cannot afford the increase”. The wage rate is R20 an hour, or R3,500 a month (depending on the number of hours worked).

Although there are minimum wage exemptions available for small businesses, the document also cautioned that having to apply for exemptions introduces additional and costly red tape for businesses.

Godongwana said the labour market reform aspect of the document contradicts resolutions taken in 2018 at Ramaphosa’s Job Summit. Some of the commitments taken at the summit include a strong push for the implementation of the national minimum wage, while Mboweni’s document wants the wage to be reviewed.

The document would be amended after engaging with unions at Nedlac.

Eskom, a thorny issue

The ANC NEC also didn’t embrace Mboweni’s idea of privatising unproductive state-owned entities (SOEs) or drastically reforming Eskom by selling its coal-fired power stations, possibly through auctions. The sale of coal-fired power stations would include staff contracts, coal-supply contracts, supplier contracts and environmental obligations, as well as a power purchase agreement at a predetermined tariff.

Instead, the NEC peddled the old idea of unbundling Eskom into three independent units of generation, transmission, and distribution. It also reiterated a long-standing ANC proposal of introducing equity partners in key SOEs.

Eskom is in dire need of funding as it is facing a more than R400-billion debt load, while its annual R25-billion revenue from the sale of electricity cannot cover its annual interest on the debt of about R50-billion.

Godongwana said further details of restructuring Eskom’s debt, which is a threat to SA’s economy because the utility supplies more than 90% of the country’s electricity, will be unveiled by Mboweni at the medium-term budget policy statement on 30 October.

Other endorsed measures

But the NEC adopted the five themes of Mboweni’s document of modernising network industries; lowering barriers to entry for new businesses and increasing competition to address distorted patterns in the ownership of the economy; prioritising labour-intensive growth in sectors such as agriculture; implementing flexible industrial and trade policies; and promoting export competitiveness and harnessing regional growth opportunities.

If these interventions are implemented over time, they are expected to raise economic growth by two to three percentage points and create more than one million job opportunities. BM