South African Finance Chief Recoils From $5.2 Billion ANC Spree

(Bloomberg) -- South African Finance Minister Enoch Godongwana warned leaders of the ruling African National Congress that the party’s project wish list could cost 73.5 billion rand ($5.2 billion) and funding it will require difficult trade offs. 

Big-ticket items that would place pressure on state finances included spending 10 billion rand on a state bank, Godongwana, who also serves as the ANC’s head of economic transformation, said in a presentation that was delivered to a Sept. 4-6 party meeting and seen by Bloomberg. The government will also have to come up with 19.6 billion rand for increases for state workers, possibly by cutting jobs, and need 4.6 billion rand to forgive unpaid highway tolls in the central Gauteng province, he said. 

While the ANC is preparing for local government elections on Nov. 1 and needs to show it is doing more to address rampant poverty and record unemployment, it has little room to maneuver as the government contends with surging national debt and limited investment.   

New projects “will require prioritisation and trade offs,” Godongwana said. “Our fiscal capacity –- as measured by the variation of own tax revenue as a percentage of domestic output –- has been deteriorating.”

Covid-19, Looting

The finance chief also cautioned that the state arms company and agricultural bank will need 8.2 billion rand of bailouts, while 15 billion rand will be needed to forgive student debt and 16 billion rand for bail outs for provinces that haven’t paid their bills. 

The government has already committed to spending 38.5 billion rand to respond to the ongoing impact of the coronavirus pandemic and a recent spate of riots and rampant looting that left 354 people dead  -- money that wasn’t previously budgeted for. Plans to institute a credit-guarantee scheme to support businesses have yet to be properly costed, although the price tag was initially pegged at 5 billion rand, the finance minister said. 

Pule Mabe, the ANC’s spokesman, wasn’t immediately able to comment when called and didn’t respond to a text message.

Godongwana cautioned against forgiving road toll debt, saying the “request has serious long-term consequences if the user-pay principle is rejected.”

The finance minister called for significant economic reforms to be implemented before President Cyril Ramaphosa presents his state-of the nation address in February.

These include: 

• Resolving a legal dispute that’s delaying the allocation of additional spectrum to telecommunications companies.
• Announcing an overhaul of the way work permits are processed to address a skills shortage.
• Ensuring state ports company Transnet SOC Ltd. issue a request for proposals to encourage private investment in port infrastructure.
• Accelerating the award of contracts from an already held tender to generate renewable power and hold another bid round.
• Establish state power utility, Eskom Holdings SOC Ltd.’s transmission unit as a separate legal entity.
• Submit the National Water Resources Infrastructure Agency Bill to Parliament to boost confidence that the country’s water supply problems are being tackled.

Elements of the presentation were reported on earlier by the Johannesburg-based Sunday Times newspaper.

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