S. Africa must tackle energy, debt problems to achieve growth

Source: Xinhua | 2019-07-26

The South African government must completely sort out energy problems, tackle finances of the state-owned entities and reduce its debt in an effort to boost its sluggish economy, an expert said Wednesday.
Dawie Roodt, chief economist at African financial services company Efficient group, made the remark after the International Monetary Fund (IMF) cut the projected growth for the country to 0.7 percent for 2019.
Roodt said several structural changes should be made in order to revitalize the economy.
"I think the economic growth is likely to come even less for this year. It will make a difference if we can resolve issues like electricity, but there are many structural issues in the economy that should be addressed," he told Xinhua.
He said one of those changes should be made at state-owned entities like power utility Eskom, South African Airways and weapon manufacturer Denel.
For years, these state-owned entities have been surviving on government bailouts because of their losses.
Finance Minister Tito Mboweni said on Tuesday in parliament that Eskom would be provided with a 59-billion-rand (4.2 billion U.S. dollars) bailout for the next two years. That didn't include the 69 billion rand (4.9 billion dollars) the minister announced in February.
The South African Broadcasting Corporation would receive a 3.2-billion-rand (230 million dollars) bailout soon.
Mboweni acknowledged the danger posed by the disastrous finances of the entities. "Eskom presents the biggest risk to the financial fiscal framework" because of its "financial difficulties."
Roodt said the state should reduce its debt and spending. The low economic growth and frequent bailouts would likely affect revenue collection.
"The state owes too much money. Revenue collection is under immense pressure. There's a need to cut back on state spending," Roodt said.