DA proposes sell-off of assets to fund infrastructure

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The opposition Democratic Alliance party is proposing a R55.4 billion sell-off of state-owned enterprises to accelerate the government’s infrastructure investment programme and boost growth without raising the budget deficit to unsustainable levels, Busiess Day reports today.

Privatisation was just one of a number of proposals the DA made in its “alternative budget” for 2012, released at a media briefing yesterday ahead of the tabling in Parliament tomorrow of the budget by Minister of Finance Pravin Gordhan. The package was aimed at expanding employment, accelerating economic growth to reach 8% over the medium term and halving poverty. It would result in a budget deficit of 5.1%, slightly below the 5.2% projected by the Treasury for 2012-13, Business Day adds.

However, selling off assets is not a proposal likely to resonate either with the government, which is committed to the notion of a developmental state involving even more state intervention in the economy than at present. Nor is it likely to be well received by the Congress of South African Trade Unions (Cosatu) which is strongly opposed to any form of privatisation.

Nevertheless, DA finance spokesman Tim Harris insisted privatisation was preferable to escalating transport and electricity tariffs, which undermined SA’s global competitiveness and was in line with the “Brazilian model” as seen in the recent sale of a 51% stake in Sao Paulo airport for more than R70 billion.

The DA argued that it was essential for state expenditure on infrastructure to increase from 7.8% of gross domestic product to the more desirable 10% (about R330 billion). Harris and his deputy, David Ross, said the DA’s proposals would result in R115 billion being spent on infrastructure by the government (R20 billionn more than projected by the Treasury for 2012) and R55.4 billion being derived from asset sales. In addition, state-owned enterprises would raise R160 billion off their balance sheets.

Included in the basket of assets which the DA believed should be sold off were SAA-SA Express (R2.9 billion), 30% of Eskom’s power generation capacity (R26 billion), SABC (R850 million), Denel (R654 million), South African Forestry Corporation (R708 million), Broadband Infraco (R1.6 billion), 30% of Portnet’s assets (R13.5 billion) and assets held by the Industrial Development Corporation (R9 billion).
“Many of these SOEs need regular bail-outs and massive guarantees, which place strain on the fiscus,” Harris said.