Jump to navigation

confidentially speaking

The Africa Confidential Blog

  • 7th October 2019

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 Rwandaand 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 TimesAfrica 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