Cabinet has welcomed investments into various sectors of the South African economy while also remaining cognisant of growth challenges.
“The President [Cyril Ramaphosa] in the State of the Nation Address [SONA] indicated that one of our key apex priorities is growth. There is no question about it. We must work towards growing the economy,” Minister in the Presidency, Jackson Mthembu, said on Thursday.
Responding to a question on the status of the economy which in the first quarter of 2019 declined by 3.2%, Mthembu said Cabinet is cognisant of the economic challenges the country faced.
The Minister’s comments come on the back of Finance Minister Tito Mboweni’s proposal of an additional funding support of R59 billion over the next two financial years to help the embattled power utility Eskom meet its financial obligations.
The Minister introduced a Special Appropriations Bill aimed at assisting Eskom with additional financial support during a sitting of the National Assembly on Tuesday.
The Minister’s proposal comes after President Cyril Ramaphosa announced during his SONA in February that Eskom was in a crisis and required additional support to improve its balance sheet.
However, Mboweni cautioned that the financial support would come at a significant cost to the fiscus and South African taxpayers.
Mboweni’s comments were echoed by rating agency Moody’s who said the proposal to more than double support for the power utility is credit negative for the sovereign because it would be an additional drain on fiscal resources.
At its Monetary Policy Committee (MPC) meeting last week, the Reserve Bank announced that it now expects Gross Domestic Product growth for 2019 to average 0.6% (down from 1.0% in May).
Investment announcements
Briefing reporters following Cabinet’s fortnightly meeting that was held in Cape Town, Mthembu said Cabinet has welcomed increased interest by prospective and current investors to consider South Africa as their preferred investment destination.
“Recent actual and possible transactions illustrate this well, and include transactions in the auto sector (Ford), chemical value chain (BFG Rail) and electrical industrial components (Aberdare) as well as potential investments such as in agro-processing (PepsiCo) this latter one subject to shareholder and regulatory processes,” said Mthembu.
Cabinet’s comments follow on the American automaker Ford’s recent announcement that it will be creating 1 200 jobs at its plant in Pretoria.
Ford announced that its expansion plans will create 1 200 jobs, based on implementing a R3 billion investment commitment. The company’s Silverton plant has installed capacity to produce up to 168 000 Rangers and Everest’s annually – an increase of 44 000 vehicles prior to the expansion.
Meanwhile, PepsiCo’s R25 billion offer to acquire Pioneer Foods was also hailed as a clear vote of confidence in the South African economy.
In the same vein, the R50 million investment by manufacturing company BFG Rail into an advanced manufacturing facility in Gauteng will result in a state-of-the-art composite manufacturing facility which boasts improved engineering processes using advanced technologies.
Cabinet has also welcomed the Abedare Cables’ announcement of an expansion of its capacity through the opening of a high-voltage power cable plant, with an investment of R135 million.
The move is set to create 58 jobs in addition to the 429 jobs at the company’s current operations in the Eastern Cape.
“Investments in a new plant, equipment and in expanded production creates new jobs and grows the GDP. The sectors where new production will take place are all within the sectors identified by President Ramaphosa in the SONA.”
The country, said the Minister, offers a unique combination of highly developed economic infrastructure, a vibrant emerging market economy and access to the fast growing African continent market.
“South Africa is also a frontier for new sectors of investments such as the green economy, oil and gas shipbuilding and the oceans economy.”
Mthembu said investment in South Africa, despite its challenges is something “we all should welcome with both hands”.
“Yes we know that we are not performing that well, that there are inhibitors that make other people not invest in our economy. We know that Cabinet and the various departments are confronting these inhibitors. We hope that these investments will continue so that we improve the performance of our economy,” he said.
Eskom chief restructuring officer
On when a Chief Restructuring officer (CRO) would be appointed for Eskom, the Minister said the issue will be before Cabinet soon.
The CRO will be expected to reposition Eskom financially with careful attention to the mix between revenue, debt and cost structure of the company.
“Cabinet will have to be appraised on who the person is, this person will help to turn around the entity. There is urgency to stabilise Eskom,” said Mthembu. – SAnews.gov.za
