Pretoria: Public Enterprises Minister MalusiGigaba says state-owned companies (SOCs) must play a more proactive role in providing infrastructure and related services on the continent in order to further secure the country’s economic future.
“Regional economic integration is an immediate strategic necessity, a core element of not just securing our growth for the future but managing the economic turbulence of the present. What is clear is that we cannot afford to [have] our investment programme impacted by an economic slowdown,” said Gigaba on Monday while addressing the Progressive Business Women’s Summit.
The minister said the investment programmes of these companies played a critical role in bolstering demand and stimulating economic activity and investment in a highly uncertain environment. SOCs also had a key role to play in driving programmes that would put in place the infrastructure, skills as well as the industrial and technological capacity to drive the economy in future.
Gigaba believed it was necessary to look for ways to increase the scale of the investment programmes should the global economy decelerate further.
“Of paramount importance is that we find ways of strengthening the SOC balance sheets. A strong balance sheet will decrease the price of debt for SOCs and create a resource buffer to sustain the investment programme and, more fundamentally, a strong balance sheet should create a high level of business confidence that the investment programmes will be rolled-out regardless of a broader economic slowdown.”
He said the department had established a new division focused on developing innovative funding models to help expand the investment programmes.
“Our first port of call in the equity funding process is going to be building “Public-Public Partnerships” with our Development Finance Institutions, particularly the Industrial Development Corporation and the Development Bank of South Africa, which have the ability and the appetite to take equity type risk that will add to the balance sheets of the SOCs, which will enable us to move into some long-term programmes with a high level of confidence.”
He also called on the country to increase its savings rate.
“Over the last five years, our rate of investment has outstripped our savings rate by around an average of 4% to 5% of GDP. We are already dependent on the international markets to fund our existing current account deficit.
“Unless we do something to increase savings, this gap can only increase and the programme will be at risk. We need to start a national dialogue on domestic resource mobilisation strategies for the funding of the national economic infrastructure and where sensible, introduce appropriate incentives to increase the national rate of saving.”