President Cyril Ramaphosa has to be more decisive if South Africa’s economy is to be salvaged, former Goldman Sachs CEO for sub-Saharan Africa Colin Coleman has said.
Coleman, who is now a Senior Fellow at Yale University, made the call during an interview with Bloomberg TV on Thursday. He said the ruling African National Congress (ANC) has the necessary majority to implement changes and what is required now is leadership.
He added, “Leadership is everything, so it is really up to President Ramaphosa to lean in and say, this is the direction the country is taking, this is who I want to lead my administration and if you are not on the ship, I will get you off.
“I think he needs to be more decisive and take the country forward, but obviously he has his own political judgements on the balance of forces in his government and in his party to take into account.”
Coleman’s economic proposals
South Africa’s economy is projected to contract by around 7.2 percent in 2020, mostly because of the COVID-19 pandemic’s impact and the lockdown’s restrictions on economic activity.
Coleman made several proposals to revive the economy, including a basic income grant, debt-equity swap for Eskom and special economic zones. They are based on a virtual lecture he gave to the University of Cape Town earlier this week.
Basic income grant
Coleman backed the government’s plan to introduce a basic income grant (BIG) to succeed the R350 special relief of distress (SRD) grant, which runs for six months and is set to lapse in October. He estimated that this would cost the government R142 billion every year.
To fund BIG, he proposed a number of tax reforms such as increasing sin tax by 20 percent, increasing carbon tax, eliminating medical aid tax credit for R300,000 per annum income or more, and increasing dividend withholding tax from 20 percent to 25 percent.
Eskom debt-equity swap
Eskom has a massive R450 billion debt. According to Coleman, South Africa should transfer Eskom’s guaranteed debt to the government’s balance sheet. The government would then be able to arrange a debt-for-equity swap to leave Eskom with a debt of R90 billion “with which it can stand on its own.”
Labour federation put forward a similar debt-equity swap proposal earlier this year. It suggested that the Government Employee Pension Fund Scheme (GEPF), through the Public Investment Corporation, could be used in that regard.
More recently, the ANC’s Economic Transformation Committee proposed that pension funds could take over some of Eskom’s assets.
Special economic zones
Coleman said more focus on special economic zones and industrial incentives would boost South Africa’s competitiveness and drive investments.
Ramaphosa has launched a number of projects in these zones in the past, including the Tshwane Automotive Hub at the Ford Motor Company in Pretoria in November last year.
Coleman’s other proposals include cracking down on the illegal economy, providing relief for businesses and implementing infrastructure projects.
“I think [Ramaphosa] is probably stronger post-COVID-19 pandemic than he was pre- it, so I would encourage him to lean in and undertake these reforms that he is promising,” Coleman said.