home Featured Is Treasury Sabotaging the Economy of South Africa?

Is Treasury Sabotaging the Economy of South Africa?

By Andile Mngxitama

South Africa’s inter-governmental wars have reached a new plateau with the announcement by Futuregrowth that it is suspending “any additional loans” to some of the biggest (state owned enterprises) SOEs. In particular Futuregrowth has identified the following entities as its first targets: Eskom, Transnet, Sanral, Landbank, IDC and DBSA. This move is akin to strangulation of the SOEs because Futuregrowth is regarded as a substantial funder of these South African SOEs.

Futuregrowth said that the decision to take such drastic steps includes “the suspension of new loans, and roll-overs of existing debt.”  Furthermore, Futuregrowth has indicated in a statement that it has “…now suspended negotiations on over R1.8bn of debt finance to three different SOEs”. This decision is by all accounts disastrous to the life of the SOEs. Many sources have raised the question of whether these drastic actions are justifiable.

The reasons provided by Futuregrowth for its actions are not purely economic, it is deeply political as well. It cited, amongst other things, that its decision was motivated by “reports” which “strongly hint of conflict between branches of South Africa’s government, the possible machinations of patronage networks, and a seeming challenge to the independence of the National Treasury.” This is tantamount to acting on speculation and media reports. 

The most troubling factor is that the decision by Futuregrowth implicates Treasury.  Links between the decision of Futuregrowth and factional battles inside the ANC cannot be discounted. For instance Trevor Manuel, who is the former Minister of Finance and has come out publicity to support Pravin Gordhan, is also the Chairman of Old Mutual which in turn is a major shareholder in Futuregrowth. Old Mutual sources a lot of funding from within the Treasury system such as via PIC and IDC. This creates a potentially unethical situation where Treasury’s funds are indirectly being used to punish SOEs. Futuregrowth has in its assets, funds sourced from the public through the shareholding of Old Mutual. It’s not a small matter that Trevor Manaual is Chairman of Old Mutual. 

A reasonable inference can be made that Futuregrowth’s withdrawal of funds is at the behest of its major shareholding partner Old Mutual. This would mean that Treasury funds are being used to fight factional battle but more importantly to create massive uncertainty in the general economy which can be seen as sabotage. The demise or deepening of the crisis of SOEs as a result of the sudden withdrawal of credit lines would lead to strengthening the calls for privatization, a policy option favored by the pro-business faction. This is tantamount to sabotaging the economy to impose particular policy outcomes.

Futuregrowth’s decision will play a big hand wittingly or not in the battles between the two factions of the ruling party over policy direction. Firstly, the Minister of Finance, Pravin Gordhan who was dramatically appointed under duress last December is seen as a candidate of private capital. Gordhan is seen as a Minister who is to ensure the implementation of neo-liberal policies so as to secure the interests of big business. Black First Land First (BLF), a black consciousness movement, has opened a criminal case against some of the captains of industry and bankers who are said to have pressurized the ruling party to appoint Gordhan as Finance Minister last December. This is in violation of the law. The organization also has lodged a similar case with the Public Protector.

The faction pitted against the pro-business faction of the ANC led by Pravin Gordhan is the “pro BRICS” faction led by the State President, Jacob Zuma. The Zuma faction is said to be aggressive in demanding black representation in the strategic sectors of the economy such as mining. This has seen, for instance, a marginal growth of coal supply to ESKOM by the black owned entity called Tegeta which is partly owned by the Gupta family. After buying Optimum Coal from the Swiss conglomerate Glencore, Tegeta was able to provide about 5% of the coal supply of ESKOM – the rest of ESKOM’s coal needs is by and large provided by traditional white owned companies. The public spat between Treasury and ESKOM is about this very development. Eskom is seen to be moving too fast with black empowerment. This has upset the established white monopoly interests.

Anti neo-liberal economists have over the years argued against the “priviatisation” of certain entities including the South African Reserve Bank (SARB), which has itself come into the fray. Recently the Deputy General Secretary of the ANC, Ms Jessie Duarte, has raised concerns about the independence of SARB and its private ownership which was unable to defend the rand. SARB responded swiftly and harshly against the claims of Duarte. It has been shown that the pro-business senior management of SARB (such as the Governor Mr Lesejaand and his deputy Kuben Pillay) had been responsible for the policies seen as pro-business and anti-people. In the current war over policy direction the old pro-business lobby has asserted itself. To this end Lesejaand and Pillay worked in the policy environment, where Trevor Manuel and Pravin Gordhan were ministers who pushed the pro-business austerity macroeconomic policy such as GEAR which in turn has been blamed for “jobless growth” and the initial privatization including allowing capital flight by allowing the big five companies to list in the London Stock Exchange.

The suspension of the credit lines to SOEs by Futuregrowth is likely to precipitate a panic in the economy and may pave the way for a down grade by rating agencies. It would seem like the war for policy direction has entered a zone of scorched earth policy where nothing is sacred. The big question now facing South Africa is whether it would be able to withstand the economic sabotage by neo-liberalism alternatively, would it be able to push back the return of aggressive pro-white business policies associated with former Minister Trevor Manuel and the current Minister Pravin Gordhan?

Leave a Reply

Your email address will not be published. Required fields are marked *

Show Buttons
Hide Buttons