Privatisation not a ‘swear word’, says South Africa’s deputy president

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The African National Congress no longer regards privatisation as a “swear word” and has accepted that “bringing private sector money on board is not selling your soul”, said South Africa’s deputy president Paul Mashatile.

In an interview with the Financial Times at the end of a week-long investor roadshow to Britain and Ireland, Mashatile said South Africa’s new government, in which the ANC is sharing power with the market-leaning Democratic Alliance, had understood the need for more private investment in sectors such as energy, water and infrastructure.

“We don’t have the money to do it, so we need the private sector,” said Mashatile, considered a potential successor to President Cyril Ramaphosa.

The ANC formed a government of national unity, known as the GNU, after its vote share dropped to 40 per cent in May’s election, the first time the former liberation movement has lost its absolute majority in the 30 years since it was elected at the end of apartheid.

Asked if the GNU, now past its 100th day in office, would survive, Mashatile said: “It won’t be a smooth ride . . . but my answer is yes, it will last five years.”

Although some members of the historically left-leaning ANC remained suspicious of the DA, considering it a predominantly white, “neoliberal” and “anti-worker” party, Mashatile said the GNU has had a strong start. “If you sit around the table with ministers in the government of national unity, you would not know who’s ANC and who’s DA,” he said.

Investor sentiment towards South Africa has improved dramatically since the formation of the GNU, after 15 years in which the economy has barely grown against the backdrop of corruption scandals and government mismanagement of basic services.

The South African rand has risen more than 12 per cent against the US dollar so far this year, behind only the Argentine peso and Turkish lira. The Johannesburg bourse’s benchmark index is up 21 per cent in US dollar terms including dividends.

However, fund managers and companies are looking for more detail on reforms to break up troubled state monopolies in energy and logistics, two chokepoints that have held back Africa’s most industrial economy in recent years.

Even before the GNU, Ramaphosa’s presidency had shepherded reforms such as creating South Africa’s first electricity market under an initiative known as “Operation Vulindlela”, or “open the way”. Investors are anxious to understand how these will continue.

This week in Johannesburg, Ramaphosa forecast the new investor optimism could help nearly triple growth to above 3 per cent by the end of next year. Close co-operation with the private sector has helped to end years of chronic electricity power cuts, resulting in 200 days in a row without blackouts.

Adrian Gore, chief executive of insurance group Discovery, said of Ramaphosa’s growth forecast: “It’s a massive stretch, but then ending load-shedding was a massive stretch. This can be done if we push really hard.”

Mashatile played down early signs of infighting within the GNU, which the ANC and the DA share with eight smaller parties. The DA has objected to a proposed amendment to the education law that it says threatens the right of schools to teach in Afrikaans and has also questioned an ANC pledge to introduce universal healthcare through a mandatory national insurance scheme.

Dean Macpherson, minister of public works and infrastructure and one of five DA members of the cabinet, told the FT the policy was “uncosted, unfunded and unimplementable”.

But Mashatile said the government was introducing mechanisms, including a dispute resolution body that he would co-chair with Macpherson, to resolve such arguments. “We are accountable to the president. We are a team.”

He admitted that some in the ANC remained anxious about the direction the party was taking, including splitting Eskom, the state electricity provider, into separate generation, transmission and distribution units, which some see as a backdoor privatisation.

But the state could not afford the R350bn it would cost to upgrade the transmission network, he said. “We’re not privatising Eskom, but we are bringing in the private sector to come with the resources to help us.”

Despite good relations with the DA, he said the ANC was keeping “the door open” for a possible return to the coalition of Julius Malema’s Economic Freedom Fighters, which had refused to join forces with the DA in the GNU.

He dismissed the idea that the inclusion of the EFF, which advocates expropriation of land and nationalisation of the central bank, could endanger more positive investor sentiment, saying the EFF could only return if it accepted the basic principles established by the coalition.

Additional reporting by Rob Rose from Johannesburg