Is Treasury Sabotaging the Economy of South Africa?

South Africa’s inter governmental wars have reached a new plateau with the announcement by Futuregrowth that its suspending “any additional loans” to some of the biggest 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 the South African SOEs.

Futuregrowth said the decision to take such drastic steps which includes  “the suspension of new loans, and roll-overs of existing debt.”  Furthermore, Futuregrowth had said in a statement,  “We have 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 but deeply political as well. It cited amongst others 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 ANC cant not be discounted. For instance, Trevor Manuel who is the former minister of finance has come out publicity to support Pravin Gordhan, is also the Chairman of Old Mutual a major shareholder in Futuregrowth. Old Mutual source lot of funding from within the Treasury system such as PIC and IDC. This creates a potential unethical situation where Treasury 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 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 a 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.

Futurgrowth decision will play a big hand wittingly or not in the battles between two factions of the ruling party over police 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 Minister who is to ensure the implementation neo-liberal policies which favors big business are sustained. 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 last December. This is a 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 presentation 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 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 as moving too fast in black empowerment, this has upset established interests.

Anti neo-liberal economists have over the years argued against the “priviatisation” of the 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 raised concerned about the independence of the 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 had been responsible for the policies seen as pro-business and anti-people such as the Governor Mr Leseja and his deputy Kuben Pillay. In the current war over policy direction the old pro business lobby has asserted itself. The two worked in policy environment where Trevor Manuel and Pravin Gordhan were ministers who pushed the pro-business austerity macroeconomic policy such as GEAR which 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 way for a down grade by rating agencies. It would seem like the wars for policy direction has entered a zone of scotch earth policy where nothing is sacred. The big question now facing South Africa is whether it would be able to withstand the economic sabotage for neo-liberalism or 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.

Source: Black First Land First.

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