The Covid-19 crisis has provided an opportunity for government to reform its state-owned enterprises, so much so that President Cyril Ramaphosa is optimistic about the future of troubled entities SAA and Eskom.
During an address to the South African National Editors’ Forum on Sunday, Ramaphosa shared views on the restructuring of the SA economy for a new normal post Covid-19, and addressing issues at state-owned enterprises (SOEs).
“Covid-19 will give us greater capacity to reset, reposition and even re-purpose SOEs,” he said.
Speaking about SAA, which entered into business rescue in December as it faced a liquidity crisis, Ramaphosa said that the process is reaching a point where we could move forward with a new airline. SAA’s business rescue plan was due to be finalised this past week, but business rescue practitioners have asked for an extension till 8 June, Fin24 previously reported.
“I am pretty gung-ho about a future of a new South African Industry, and I am also gung-ho about the future of the aviation industry,” the president said. He added that the flag carrier is respected across the continent and that Johannesburg will be used as a hub to distribute Covid-19 medical supplies.
“I see a good future for SAA, and similarly I see a better future for Eskom,” Ramaphosa said.
Eskom, which is facing a debt burden of R450 billion, has been able to stave off load shedding during lockdown. However, its sales had taken a knock with businesses across industries halting activity. The Department of Public Enterprises told Parliament this past week that the power utility may report a loss of R16 billion for the 2020 financial year.
But Ramaphosa was fairly bullish about the interventions underway at Eskom. “All these are being done in the proper way, and with proper consultation,” Ramaphosa said.
The president will soon announce the names of the SOE Council, who will advise government on the way forward with SOEs, he said.
Speaking more broadly on the economy, the president said we could not “return the economy to where it was before the virus”.
“Covid-19 changes everything, it will change many things and the way our economy functions,” he said.
In adjusting for a new global economy, a social compact between government, business and labour is required to ensure inclusive growth.
He stressed the importance of restructuring the economy, to be aligned to deal with the challenges facing society. “We have been operating under an economy which has been colonial and racist, over the many years,” he said.
The economy must respond to poverty prevailing in the country and be one that creates jobs.
“Covid-19 gives a stronger rationale to transform and restructure the economy,” Ramaphosa explained.
The president appealed to South Africans to buy local, as a form of patriotism. “This is a mindset change, and in a way — economic patriotism. We would like to see all South Africans be more patriotic, even when it comes to the economy, “ he said. Encouraging localisation of supply chains and industrialising the economy, would help to drive growth, he added.
The president also spoke of an employment drive, which could start during the pandemic, particularly getting workers to screen communities.
He said that the pandemic had also brought an employment opportunity for social workers.
“This is a time when social workers need to be binding the wounds of our nation. Many people will be negatively affected by Covid-19,” he said.
Apart from creating new sectors in the “care” economy, there is also a chance to create new sectors in the green economy, Ramaphosa said.
The lockdown, which was instituted on 26 March, in order to slow the spread of Covid-19, resulted in slowing economic activity. The Reserve
Bank’s latest projections indicate a contraction of 7 percent. This is the worst performance seen since the global depression in the 1930s.
National Treasury’s projections as at 30 April, 2020 indicate job losses roughly between 600 000 to 1,8 million.