confidentially speaking
The Africa Confidential Blog
Belt-tightening in South Africa, split verdict in Tunisia, and schism in the East African Community
Patrick Smith
This week the news agenda starts in Pretoria, where despite a successful summit with Nigeria's President Muhammadu
Buhari, South Africa's President Cyril
Ramaphosa is under mounting pressure to set out a radical new
strategy to get his country out of the economic doldrums. And in Tunisia,
yesterday's parliamentary polls show an electorate disenchanted with
the old parties and looking for new economic solutions. The East
African Community, already constrained by political friction between Rwanda
and Uganda, now has to address a financing problem
with new member South Sudan building up a backlog of
unpaid dues. Finally, Tanzanian President Magufuli could be heading for another contretemps with big business, this time
with Nigerian mogul, Aliko Dangote.
ECONOMIC CRUNCH IN SOUTH AFRICA: Key
policy announcements, rescue for power utility and cost-cutting budget
due in October
With growth running at under 2% and tax revenues
flagging, President Cyril Ramaphosa's government may have to cut
spending by as much as US$20 billion. The extent of the
belt-tightening – some predict across the board cuts of 6% a
year for three years – will be made clear when Finance Minister Tito
Mboweni makes his medium-term budget policy statement (MTBPS)
on 30 October.
President Ramaphosa, due to speak at the Financial Times
Africa summit in London on 14 October, is to set out the government's
new economic strategy.
These are likely to include the Treasury's plans to sell off
some state-owned enterprises as well as restructuring and
'co-investment' in strategic companies such as Eskom, the power
utility.
South African Airways will also be in the firing line with
some urging an outright sale but the most likely outcome looks to be a
tie-up with a new strategic investor. The airline has some of the most
profitable routes in Africa, as well as many loss-making ones.
One possible suitor could be Ethiopian Airlines, the most profitable and one of the most efficient carriers in
Africa. Industry sources say exploratory talks have already started.
Still more contentious among trades unionists are plans to cut
collective bargaining rights in small small businesses.
Last week the Institute of International Finance warned that
public debt to GDP could hit 95% by 2024. It has doubled from 30% to
nearly 60% since 2008.
The debt burden will increase by 6% if energy parastatal
Eskom's debts are shifted onto the government's shoulders, according to
the IIF. Another plan pushed by the Treasury is to sell off some of
Eskom's power plants, and splitting its generation and distribution
operations. The government's plans to restructure Eskom will be at the
heart of Mboweni's statement at the end of the month.
SPLIT VERDICT IN TUNISIA: No
party won a majority in parliamentary polls but Islamist Ennahda has
two months to form a coalition
Exit polls show Ennahda, the formerly-proscribed
Islamist party under Rachid Ghannouchi, in the lead
with 40 seats in elections for the 217-seat National Assembly. In
second place with 33 seats is Heart of Tunisia, the party of detained
presidential candidate and businessman, Nabil Karoui,
described by critics as the Silvio Berlusconi of
Tunisia.
The turnout for the parliamentary elections on 6 October is
reckoned to be much lower than the 45% who voted in the first round of
presidential elections on 15 September. Nidaa Tounes, the main centrist
party was reduced to just one seat, after winning 86 in the 2014
elections.
As Ennahda and Heart of Tunisia have refused to work together
in government, the job of putting together a coalition, winning the
support of at least 109 MPs, will be tough. It will be made harder
still by the number of independent candidates who have won seats.
Held in August on corruption charges, which he denies, Karoui
is to contest against law professor Kais Saied in the
second round of the presidential elections on 13 October. Saied will
have the backing of Ennahda.
Alongside the politicking, most Tunisians are focusing on the
ailing economy. Unemployment has worsened since the wave of protests
that triggered the Arab Spring in 2011.
This week a team from the International Monetary Fund is due
in Tunis this week. According to a draft budget, the government
needs 8.5 billion Tunisian dinars ($3 billion) in external financing in
2020, a 10% increase on last year. It plans to issue bonds worth
close to $900 million.
Years of economic stagnation was one of the main reasons why
voters deserted the political establishment in September's first round
of the presidential elections, which pitched Saïed, against Karoui.
The IMF agreed a four-year programme worth $2.94 billion in
June 2016, the last tranche of which is still to be paid. The Fund is
likely to demand further reforms from the new government.
SCHISM IN EAST AFRICAN COMMUNITY: South
Sudan is at the centre of a cash crisis over members' failure to pay
dues on time
South Sudan has only been a member of the East African
Community (EAC) for a couple of years, but the EAC's Council of
Ministers will decide this month whether to expell it. Adan
Mohamed, the acting chairman of the EAC Council of Ministers
and Kenya's cabinet secretary for EAC and Regional
Development, said the Council will meet to deliberate on delayed
contributions from members.
The six-nation EAC has one of the most ambitious agendas for
trade and political integration in Africa but has been held back by
members failing to pay their levies on time or, in some cases, at all.
Between them the six members owe the EAC $66 million, $27
million of which is accounted for by South Sudan's failure to pay.
The government in Juba says it can't afford to pay due to its
political and economic travails, a claim that has won it some sympathy.
For others, patience with the Juba government is running thin.
EAC officials want the bloc to move away from membership dues
to alternative forms of financing. One way would be a trading levy akin
as tried at the African Union. That model had had limited
success with only a few countries have handing over the
funds to the AU.
TANZANIA'S DANGOTE FIGHT: Government
picks legal battle with Nigerian cement mogul again
Relations between President John Magufuli and Aliko
Dangote seem to have recovered after a spat in 2017 over the
government's economic nationalism strategy which the company had warned
would drive away investment.
Dangote, the Nigerian magnate whose Dangote Group conglomerate
is one of Africa's biggest companies, rowed back quickly with some
diplomatic statements. Then he boosted his company's operations in
Tanzania, tripling its market share in the country to 22% this year.
Now local reports suggest that Dangote Cement has not
submitted its operation reports for the past three years, in breach of
the government's law with foreign investors. It has been given until 7
October to file the reports to the Tanzania Investment Centre. If it
fails it may face state sanctions.
THE WEEK AHEAD IN BRIEF
ELECTION IN MAURITIUS IN NOVEMBER: As
criticisms over corruption and family favouritism mount, Premier Jugnauth seeks another term
IMF RETURNS TO CONGO-KINSHASA: Doubts over
commodity prices and clawing back stolen asserts have pushed the Tshisekedi government to reopen talks on a reform programme
CAMEROON FREES OPPOSITION CHIEF: After start
of long-delayed political dialogue, Biya releases
election challenger and 300 other oppositionists
BENIN'S NATIONAL DIALOGUE: President Talon to open talks with opposition in Cotonou on 10-12 October
GAS DEAL IN MOZAMBIQUE: Exxon Mobil and ENI
to finalise $30billion gas export project in Maputo on 8 October
