Overhauled and shaken up: Is Ramaphosa's new economic cluster primed for growth?
Some good appointments, but not all from the A-team
The economic cluster is by far the most important for the success of South Africa's Government of National Unity.
South African president Cyril Ramaphosa announced a thorough overhaul of his economic ministers on Sunday night.
Only two members of the previous Cabinet — finance minister Enoch Godongwana and mineral and petroleum resources minister Gwede Mantashe — remain in their previous portfolios.
With the economy barely growing during his first five-year term, Ramaphosa needs his new set of ministers to rebuild a platform for economic growth. This means accelerated and expanded structural reforms, some of which are complex and require sophisticated and motivated leadership.
It also means that South Africa needs to fix its mining sector, which is a mainstay of the economy but has fallen out of favour with investors. The reappointment of Mantashe, under whose watch the sector has continued to struggle, although expected, will not be regarded as a pro-growth move.
Godongwana's reappointment, also anticipated, will be welcomed. He has been in the post for almost three years. Godongwana has established a track record for pragmatic management of the country's finances. Over the past three years, his mission has been to reduce debt by cutting spending. He is set to achieve the first primary budget surplus (expenditure less debt costs) in 15 years.
Godongwana is also one of the strongest advocates in the Cabinet for structural reform and has used his leverage over the budget to compel state-owned enterprises to open up network industries to competition and liberalise markets.
The two top priorities for generating economic growth in the immediate and medium-term remain the establishment of a reliable supply of electricity and the repair of the national logistics system.
The ministries of energy and electricity (Kgosientsho Ramokgopa) and transport (Barbara Creecy) are the two most important economic posts after the finance ministry. These posts will also probably manage the state-owned enterprises in their sector, putting the two in charge of the economy's engines, Eskom and Transnet. This was not entirely clear from the statement, but would accord with what Ramaphosa has previously said.
The department of public enterprises will no longer exist, and the presidency will take responsibility for creating a "new shareholder model", probably in the form of a state holding company, as already outlined in draft legislation.
Fixing the energy crisis
In the former, Ramokgopa — who was previously minister of electricity — has shown himself determined to solve the energy crisis. At Eskom, which will now fall under his care, he has had some success improving operations.
While he has advocated that the lives of Eskom's coal-fired power stations be extended (out of necessity in the short-term, in his view), he is not opposed to renewable energy and sees it as an important, cheaper and cleaner form of generation. However, he is a strong 'party man' and would be unlikely to deviate from the African National Congress' (ANC) passionate support for nuclear energy, despite the absence of a rational case for its inclusion.
The appointment of Creecy to the transport ministry is an enormously positive move. Transport will now be home not only to the Passenger Rail Agency of South Africa (Prasa) but also to Transnet. The department is also charged with executing complex economic reforms, including the establishment of a rail Infrastructure manager and a transport regulator.
Creecy, previously minister of forestry, fisheries and the environment and a previous provincial minister of finance, has the experience, diligence and attention to detail of few of her Cabinet colleagues.
Complex and critical
After energy and logistics, water and local government are the next two urgent priorities for structural reform. Senzo Mchunu, who was a well-regarded minister of water and sanitation, has been moved to police, which will be a disappointment to those in the water sector.
The new portfolio appointment is Pemmy Majodina, a newcomer to Cabinet, having previously been the ANC's chief whip in Parliament. While the portfolio might appear to be straightforward, a complex and critical process of institutional reform is under way that will require a strong champion. It is common cause that water and water security are emerging as the next biggest supply-side constraint on the economy.
The appointment of Inkatha Freedom Party president Velinkosi Hlabisa as minister of co-operative governance and traditional affairs (Cogta) would have likely been political rather than economically motivated, given the need to manage political dynamics in KwaZulu-Natal. While not part of the economic cluster, in the next five years, structural reform of local government is absolutely imperative if there is to be a conducive environment for investment and job creation.
This agenda risks being overshadowed by the political demands of the portfolio.
Political tussle
Parks Tau, a former executive mayor of Johannesburg and a deputy minister of Cogta in the previous administration — and who would have made a good pick for the ministerial job this time — has been appointed to head trade, industry and competition.
While the Democratic Alliance (DA) and the ANC fought a political tussle over the portfolio in negotiations leading to the Cabinet appointments, industrial and trade policies are less contentious (excluding BEE) than might be expected.
Over the past five years, the department of trade, industry and competition has developed a large number of 'master plans' for sectors of the economy. The master plans will provide South Africa with a far more effective industrial policy than has been the case previously. With industrial policy now in vogue across political lines, there is potential for Tau — regarded as one of the most competent of Ramaphosa's previous crop of deputy ministers — to make a measurable impact.
With structural reform already primed for acceleration by the presidency's 'Operation Vulindlela', the overhauled economic cluster– although not all picked from the A-team – will have a better chance than before at igniting growth.
South Africa's economic growth outlook for the medium-term is bleak. The Reserve Bank expects 1.2% growth in 2024, rising to 1.6% in 2026. That is barely enough to keep pace with population growth, and the new Cabinet will need to ensure that they push delivery beyond business as usual.
- News24
Only two members of the previous Cabinet — finance minister Enoch Godongwana and mineral and petroleum resources minister Gwede Mantashe — remain in their previous portfolios.
With the economy barely growing during his first five-year term, Ramaphosa needs his new set of ministers to rebuild a platform for economic growth. This means accelerated and expanded structural reforms, some of which are complex and require sophisticated and motivated leadership.
It also means that South Africa needs to fix its mining sector, which is a mainstay of the economy but has fallen out of favour with investors. The reappointment of Mantashe, under whose watch the sector has continued to struggle, although expected, will not be regarded as a pro-growth move.
Godongwana's reappointment, also anticipated, will be welcomed. He has been in the post for almost three years. Godongwana has established a track record for pragmatic management of the country's finances. Over the past three years, his mission has been to reduce debt by cutting spending. He is set to achieve the first primary budget surplus (expenditure less debt costs) in 15 years.
Godongwana is also one of the strongest advocates in the Cabinet for structural reform and has used his leverage over the budget to compel state-owned enterprises to open up network industries to competition and liberalise markets.
The two top priorities for generating economic growth in the immediate and medium-term remain the establishment of a reliable supply of electricity and the repair of the national logistics system.
The ministries of energy and electricity (Kgosientsho Ramokgopa) and transport (Barbara Creecy) are the two most important economic posts after the finance ministry. These posts will also probably manage the state-owned enterprises in their sector, putting the two in charge of the economy's engines, Eskom and Transnet. This was not entirely clear from the statement, but would accord with what Ramaphosa has previously said.
The department of public enterprises will no longer exist, and the presidency will take responsibility for creating a "new shareholder model", probably in the form of a state holding company, as already outlined in draft legislation.
Fixing the energy crisis
In the former, Ramokgopa — who was previously minister of electricity — has shown himself determined to solve the energy crisis. At Eskom, which will now fall under his care, he has had some success improving operations.
While he has advocated that the lives of Eskom's coal-fired power stations be extended (out of necessity in the short-term, in his view), he is not opposed to renewable energy and sees it as an important, cheaper and cleaner form of generation. However, he is a strong 'party man' and would be unlikely to deviate from the African National Congress' (ANC) passionate support for nuclear energy, despite the absence of a rational case for its inclusion.
The appointment of Creecy to the transport ministry is an enormously positive move. Transport will now be home not only to the Passenger Rail Agency of South Africa (Prasa) but also to Transnet. The department is also charged with executing complex economic reforms, including the establishment of a rail Infrastructure manager and a transport regulator.
Creecy, previously minister of forestry, fisheries and the environment and a previous provincial minister of finance, has the experience, diligence and attention to detail of few of her Cabinet colleagues.
Complex and critical
After energy and logistics, water and local government are the next two urgent priorities for structural reform. Senzo Mchunu, who was a well-regarded minister of water and sanitation, has been moved to police, which will be a disappointment to those in the water sector.
The new portfolio appointment is Pemmy Majodina, a newcomer to Cabinet, having previously been the ANC's chief whip in Parliament. While the portfolio might appear to be straightforward, a complex and critical process of institutional reform is under way that will require a strong champion. It is common cause that water and water security are emerging as the next biggest supply-side constraint on the economy.
The appointment of Inkatha Freedom Party president Velinkosi Hlabisa as minister of co-operative governance and traditional affairs (Cogta) would have likely been political rather than economically motivated, given the need to manage political dynamics in KwaZulu-Natal. While not part of the economic cluster, in the next five years, structural reform of local government is absolutely imperative if there is to be a conducive environment for investment and job creation.
This agenda risks being overshadowed by the political demands of the portfolio.
Political tussle
Parks Tau, a former executive mayor of Johannesburg and a deputy minister of Cogta in the previous administration — and who would have made a good pick for the ministerial job this time — has been appointed to head trade, industry and competition.
While the Democratic Alliance (DA) and the ANC fought a political tussle over the portfolio in negotiations leading to the Cabinet appointments, industrial and trade policies are less contentious (excluding BEE) than might be expected.
Over the past five years, the department of trade, industry and competition has developed a large number of 'master plans' for sectors of the economy. The master plans will provide South Africa with a far more effective industrial policy than has been the case previously. With industrial policy now in vogue across political lines, there is potential for Tau — regarded as one of the most competent of Ramaphosa's previous crop of deputy ministers — to make a measurable impact.
With structural reform already primed for acceleration by the presidency's 'Operation Vulindlela', the overhauled economic cluster– although not all picked from the A-team – will have a better chance than before at igniting growth.
South Africa's economic growth outlook for the medium-term is bleak. The Reserve Bank expects 1.2% growth in 2024, rising to 1.6% in 2026. That is barely enough to keep pace with population growth, and the new Cabinet will need to ensure that they push delivery beyond business as usual.
- News24
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