President Cyril Ramaphosa on Thursday said that the government was committed to establishing a sovereign wealth fund (SWF) but the conditions currently did not exist for its immediate formation.
Answering oral questions in the National Assembly, Ramaphosa said countries with SWF broadly maintained surpluses in their current accounts and budget balances.
“At present, South Africa’s fiscal position, with substantial current account and budget deficits, is not favourable for the establishment of a Sovereign Wealth Fund.”
He said funding for service delivery remained under pressure and that additional resources were required to improve the recruitment of key personnel as well as increase investment in the maintenance of basic service infrastructure.
Ramaphosa said the most appropriate policy path was to use any additional resources at present to reduce the debt burden and improve the delivery of services.
“We have therefore suggested that one of the possible routes towards the establishment of a sovereign wealth fund is through the reform and consolidation of our state-owned enterprises.
“We are working to implement a new centralised ownership model for SOEs.”
Ramaphosa said the establishment of a state-owned SOE holding company would give greater capacity to building a sovereign wealth fund.
“We are committed to create a sovereign wealth fund and we believe that the architecture that we are putting together now will be able to assist us in building a SWF.
“This we will be doing for future generations because it takes quite a while to build a facility like a SWF.”
Ramaphosa also said the poor condition of the country’s rail network and the inefficient operation of port terminals represented a binding constraint on economic growth and job creation. He said government was urgently working to restore the logistics system to world-class standards.
“As a result of Transnet’s limited balance sheet and our constrained fiscal resources, we need to mobilise capital for this from the private sector.”
Ramaphosa said the sixth administration commissioned research on the opportunities for private sector participation in the logistics sector.
“This research found that there is significant appetite for private investment in ports and rail. It also found that a clear and consistent legal and regulatory framework is needed to unlock this investment. It requires a level playing field for private operators.”
He said a dedicated private sector unit had already been established by the Department of Transport to identify and develop further opportunities for private sector investments.
“The opportunities will be realised through concession, joint ventures and other models.
“At the same time, we have made it clear that port and rail infrastructure will remain in public ownership, even as competition is introduced in operations,” he said.
“We are confident that through these efforts, and by implementing the Freight Logistics Roadmap, we will enable massive new investment in our ports and rail system. This will unlock economic growth and create jobs.”
He said the process of embarking on reform was not about handing over state assets in terms of ownership, but co-operating with the private sector.
Ramaphosa also apologised to MKP parliamentary leader John Hlophe for referring to him as a judge when he spoke about South Africa taking Israel to the International Court of Justice over its actions in Gaza.
MKP chief whip Mzwanele Manyi said Ramaphosa mocked Hlophe, saying he knew that he had participated in a process that unfairly impeached him as judge.
Dr Hlophe was impeached earlier this year as judge president of the Western Cape High Court after the DA and ANC voted in favour of the motion.
Cape Times