Five Things to Watch in South Africa President Ramaphosa’s Speech

Mike Cohen
(Bloomberg) -- South African President Cyril Ramaphosa on Thursday delivers his first state-of-the-nation speech since the ruling party extended its quarter-century grip on power in last month’s election. His address to parliament in Cape Town is scheduled to begin at 7 p.m. local time.Here are five key things to watch out for:1\. A rescue plan for the state power utilityRamaphosa’s office has said he’ll announce new measures to ease the crisis Eskom Holdings SOC Ltd., which supplies most of South Africa’s electricity, has wracked up more than $30 billion in debt and is at risk of insolvency. The utility got a three-year, 69 billion-rand ($4.7-billion) bailout in the February budget, but that won’t nearly be enough to stabilize its finances. The National Treasury would probably breach its expenditure ceiling and deficit targets if it’s forced to come up with additional money, and that could cost the country its last remaining investment-grade credit rating. Ramaphosa could elaborate on plans announced in his last keynote address in February to split Eskom into generation, distribution and transmission units under a state holding company -- a measure that’s been opposed by labor unions that fear it will lead to privatization and job losses.2\. Support for the national airlineSouth African Airways also has its back to the wall -- it last made a profit eight years ago and needs to come up with 12.7 billion rand to pay off debt that matures this year and another 4 billion rand to keep flying into 2020. The carrier will be looking to Ramaphosa for reassurances that the government will provide it with the backing it needs to raise new loans. South Africa is open to selling SAA on condition that the buyer commits to expanding jobs and the tourism industry, according to Dondo Mogajane, the director general of the National Treasury.3\. A strategy to revive economic growthAfrica’s most industrialized economy contracted an annualized 3.2% in the first quarter, dealing a blow to Ramaphosa’s efforts to halve a 28% unemployment rate. The president may reveal what’s being done to reduce red tape and other hindrances to growth and investment as the government targets a top-50 position in the World Bank’s ease-of-doing-business rankings within three years. It currently ranks 82nd out of 190 nations. There could also be announcements on relaxing visa requirements to attract more tourists, and an indication of the government’s latest thinking on the possible sale of state assets.4\. A way forward on land restitutionThe ruling party’s decision in December 2017 to change the constitution to make it easier for the government to take land without paying for it has rattled investors and farmers. Since then, lawmakers and a government advisory panel have been wrestling with how to implement the decision in a manner that addresses racially skewed ownership patterns without derailing the economy. Ramaphosa may release the panel’s findings and give some idea as to how the process of land restitution will unfold.5\. Certainty on the role of the central bankAce Magashule, the secretary-general of the ruling party, caused shock waves in financial markets this month when he announced that the central bank’s mandate should be changed to ensure it does more to foster economic growth and create jobs. Ramaphosa repudiated those comments and put the ruling party’s plans to nationalize the central bank on hold, saying they weren’t feasible at this stage. The president could provide further reassurances that the bank’s independence is sacrosanct and it will remain focused on fighting inflation.(Updates with South Africa open to selling national airline in second point to watch for.)To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.netTo contact the editors responsible for this story: Karl Maier at kmaier2@bloomberg.net, Paul RichardsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

(Bloomberg) -- South African President Cyril Ramaphosa on Thursday delivers his first state-of-the-nation speech since the ruling party extended its quarter-century grip on power in last month’s election. His address to parliament in Cape Town is scheduled to begin at 7 p.m. local time.

Here are five key things to watch out for:

1. A rescue plan for the state power utility

Ramaphosa’s office has said he’ll announce new measures to ease the crisis Eskom Holdings SOC Ltd., which supplies most of South Africa’s electricity, has wracked up more than $30 billion in debt and is at risk of insolvency. The utility got a three-year, 69 billion-rand ($4.7-billion) bailout in the February budget, but that won’t nearly be enough to stabilize its finances. The National Treasury would probably breach its expenditure ceiling and deficit targets if it’s forced to come up with additional money, and that could cost the country its last remaining investment-grade credit rating. Ramaphosa could elaborate on plans announced in his last keynote address in February to split Eskom into generation, distribution and transmission units under a state holding company -- a measure that’s been opposed by labor unions that fear it will lead to privatization and job losses.

2. Support for the national airline

South African Airways also has its back to the wall -- it last made a profit eight years ago and needs to come up with 12.7 billion rand to pay off debt that matures this year and another 4 billion rand to keep flying into 2020. The carrier will be looking to Ramaphosa for reassurances that the government will provide it with the backing it needs to raise new loans. South Africa is open to selling SAA on condition that the buyer commits to expanding jobs and the tourism industry, according to Dondo Mogajane, the director general of the National Treasury.

3. A strategy to revive economic growth

Africa’s most industrialized economy contracted an annualized 3.2% in the first quarter, dealing a blow to Ramaphosa’s efforts to halve a 28% unemployment rate. The president may reveal what’s being done to reduce red tape and other hindrances to growth and investment as the government targets a top-50 position in the World Bank’s ease-of-doing-business rankings within three years. It currently ranks 82nd out of 190 nations. There could also be announcements on relaxing visa requirements to attract more tourists, and an indication of the government’s latest thinking on the possible sale of state assets.

4. A way forward on land restitution

The ruling party’s decision in December 2017 to change the constitution to make it easier for the government to take land without paying for it has rattled investors and farmers. Since then, lawmakers and a government advisory panel have been wrestling with how to implement the decision in a manner that addresses racially skewed ownership patterns without derailing the economy. Ramaphosa may release the panel’s findings and give some idea as to how the process of land restitution will unfold.

5. Certainty on the role of the central bank

Ace Magashule, the secretary-general of the ruling party, caused shock waves in financial markets this month when he announced that the central bank’s mandate should be changed to ensure it does more to foster economic growth and create jobs. Ramaphosa repudiated those comments and put the ruling party’s plans to nationalize the central bank on hold, saying they weren’t feasible at this stage. The president could provide further reassurances that the bank’s independence is sacrosanct and it will remain focused on fighting inflation.

(Updates with South Africa open to selling national airline in second point to watch for.)

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editors responsible for this story: Karl Maier at kmaier2@bloomberg.net, Paul Richardson

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.