President Cyril Ramaphosa wants to get the South African economy into top gear during his first five-year term after many years of little to no growth.
“We want to change gear. We want to get into top gear. We have an economy that has not been growing for more than a decade in an appreciable way. That troubles us. That troubles South Africa. We want to move out of that low growth scenario and get into top gear. We want to make our economy much more attractive to investors. What has made us less attractive is a number of issues,” Ramaphosa told a gathering of 150 people from local and international banks and financial services companies who attended the Goldman Sachs South African conference, held at the swanky Four Seasons Hotel in Johannesburg.
During his appearance at the conference, Ramaphosa was asked questions by Colin Coleman, Goldman Sachs’s Sub-Saharan Africa chief executive.
Coleman said that the people at the conference had about $400 billion (R5.7 trillion) in assets under management.
“What are you going to do differently? What do you think about this next five years?” Coleman asked Ramaphosa - who will enter his presidential term after an initial 14-month term that began in February 2018.
Ramaphosa, who noted that this was his third public appearance since the national elections on May 8, emphasised the need to work with investors.
“We are going to ensure that the certainty that investors want to see is there. We are going to continue reforms of our state-owned enterprises. A number of them have held us back. The key one is electricity producer Eskom. We are going to proceed to clean it up. Corruption had set itself into Eskom,” Ramaphosa said.
“We are now going to reconfigure our Cabinet, which will be announced in a few days. So that too will lend itself to being part of this reform package that our country needs for our economy to move forward.”
The presidential inauguration is set to happen on Saturday May 25, and the Cabinet announcement is expected to be made the week after.
Ramaphosa’s second state of the nation address for this year is set to take place on June 20.
‘Lack of jobs keeps me awake’
He said that he would address the “bigger issues” and his plans for the next five years in that address.
Ramaphosa feels that he is confident in his “determination to clean up” and “implement the reforms” that the economy needs, with the key focus on job creation.
“The key mandate I need to focus on as president, is to focus on jobs. That’s what keeps me awake at night. Too many of our people are out of work, particularly young people. We want to come out with policies and projects that ensure that young people get jobs.”
Coleman said that investors were looking for signs that South Africa had hit the economic bottom, with Ramaphosa adding that the regulatory framework in the country impeded a lot of business activity.
“Small and medium enterprises always complain that it takes them forever to get a permit for this or that. We are going to be making a number of announcements [regarding that] shortly,” he promised.
“We are going to be focusing on ways to generate more economic growth and creating jobs.”
‘Eskom to big to fail’
Coleman said that investors were “very worried” about SOEs and that “they were a very significant challenge”.
Ramaphosa countered by blaming management failures and state capture: “The challenges are management issues [and] those who sought to capture the state. You all know that we have had a major challenge of state capture. The board, the management, the governance processes in Eskom were destroyed – completely destroyed. In fact, that started right at the top, at the department – even at the higher top.”
“Eskom is too big to fail. It holds the fortunes at the economic level [and] at the social level.”
“We need to work out an incredible business plan for Eskom. To get it out of the mess that it is in. The plan is in place. It has been tested. It has been evaluated – it is credible. It can be implemented. We have to have an effective management team. We have to have a very good board to ensure proper governance. We also need to look at the debt and address [it]. That is precisely what we are doing now. If Eskom fails – then the economy fails.”
Ramaphosa said that the whole country needed to play a role to put Eskom back on its feet.
‘Follow China in public, private partnership’
Turning to the financial markets industry, Coleman said that they were eager to participate in the solution.
He asked Ramaphosa if the words “private sector” was a swear word.
In response Ramaphosa said that the government would be looking to bring the private sector on board to “do what they do best”.
The private sector could even take equity positions in state assets, he said.
“Look at what the leading communist country in the world – China – have been able to do in the private sector, as equity partners in China Mobile: list them on the New York Stock Exchange. That is the trajectory that we should be following.”
“There is a great deal of value that can be extracted when there is a partnership between the private sector and the public sector.”
“The swear word has been privatisation,” Ramaphosa said.
People feared privatisation because where it had happened it had resulted in job losses, Ramaphosa added.
“We want to do things in a smart way. The smart way to do things is to work with the private sector. To develop those developmental needs.”
Ramaphosa said that South Africa faced a major challenge with a 60% youth unemployment rate.
“Youth unemployment is a huge headache.”
‘We will expropriate land’
Regarding the land question, which Ramaphosa referred to as the “original sin”, he said that: “The governing party, when it was formed in 1912, was not formed for the vote, human rights and all that, it was formed for the land. Originators and founders of the ANC said our land was taken away from us – we were disposed of our land. Some of it happened brutally, some of it happened by pushing people off the land.”
“The ANC conference said that we need to reform that land, but we must make sure that it doesn’t have a negative effect on the economy.”
“We are going to insist that everything is done in terms of our Constitution – in terms of the rule of law. I have repeatedly acknowledged that there will never be land grabs. We will not allow land grabs to happen. We will ensure that the process of land reform takes place in an orderly manner and in a manner where everyone fully participates.”
“Foreign investors, have no fear. There is no way we can invite foreign investors to come to our country and tomorrow we take your land away. That is not going to happen.”
“We are going to pass the Expropriation Act in Parliament. This law is going to say that these are the types and parcels of land that can actually be looked at for expropriation. We have large parcels of land in our country. A number of those are owned by state-owned enterprises and municipalities – we are going to be focussing on that. People want land to build homes and houses.”
“If we do things in a way that is found to be reckless, and is outside the parameters of our Constitution, South Africans can take us to court. Where they have, they have often won. So there are great protections in our legal or constitutional architecture. It is to that end that I say do not fear, this is a process that must address the original sin.”
“We are not a banana republic, we are Nelson Mandela’s republic. We will do it in accordance with the ethos that Nelson Mandela lived by and stood for.”