Briefing
The briefing was given by the Chair of the Cluster, Mr M Mpahlwa, Minister of Trade and Industry. He was accompanied by Dr I Matsepe-Casaburri, Minister of Communications, and Mr A Erwin, Minister of Public Enterprises.
Minister Mpahlwa said that considerable strides had been made in fast-tracking the cluster’s objectives. Inflation rates were within the target range of 3-6%. They were lowering cost structures throughout the economy and enhancing levels of competition. Considerable progress had also been made in the services sector. In terms of enterprise development and support, there was more focus on the previously disadvantaged and they were addressing skills shortages. Significant advances had been made in research and development. They promoted a more equitable geographic spread of economic activity. Targeted interventions in the second economy had been made. A governance strategy to build capacity had been implemented. Progress in these areas will be monitored over the next three to five years.
Minister Matsepe-Casaburri reported that a second national telecoms operator (SNO) was being established to reduce consumer costs. Discussions had been taking place for the last six months. Adjustments had been made to the initial proposals. On 17 September, the SNO would be awarded the contract. The SNO consisted of Nexus Connexion Pty, Transtel, Esitel, WIP Investments Nine Pty Ltd (trading as CommuniTel), Two Telecom Consortium Pty Ltd, and the remaining to unallocated equity shareholders. The licence would be granted subject to the following conditions: acceptance of the shareholding and control structure of SNO;
finalisation of and agreement on the business plan; and finalisation of the shareholders’ and subscription agreements.
Questions and answers Q] A journalist asked what effect the litigation regarding the second national operator had had on the final decision.
A]. Minister Matsepe-Casaburri said that the litigation arose because control was not what had been anticipated. It was a difference of opinion. The 13% to be given to COMITEL and its partners had now been halved to ensure that there was no collusion between shareholders. It was not expected that there would be further litigation.
Q] A journalist from Financial Mail asked what effect the second network operator would have on consumers.
A] Minister Matsepe-Casaburri said that the SNO per se would not create any significant reduction in costs. It had to be accompanied by a number of other factors. Companies were likely to have better interconnection agreements. The costs of telecommunications should be reduced when the measures were introduced next month. As the public would have an option with whom to do business, this would impact on the second economy. In October, invitations to apply for the remaining licenses will be made. This intervention meant rural areas would have access. Businesses that would not normally have wanted to go into rural areas because of the lack of infrastructure, would possibly now be more interested. The expansion of communications infrastructure helped in creating more jobs.
A] Minister Erwin wanted to add some clarity to the issue of the second licence. The issuing of a second licence did not mean it came into operation immediately. There were provisos that had to be satisfied in order for the companies to come into operation. The companies had to satisfy certain requirements before the licence was granted.
A] Minister Mpahlwa said that when the last budget was tabled, they had indicated that more time was required. Much more work needed to be done to bring the two parties closer together.
Q] A Business Day journalist asked why the new water utility was needed.
A] Minister Mpahlwa said sustainable policies were needed, as well as more commonality in the way South Africa’s water resources were managed.
A] Minister Erwin said that there would be a Paper published on the water utility that would go into detail on framework. This would be published for public comment very soon.
Q] The journalist from Business Day then asked why there was a need for a special committee between Treasury and the Reserve Bank.
A] Minister Mpahlwa said interaction between Treasury and the central bank was crucial, so institutionalising such exchanges between officials had been needed for inflation management.
Q] A journalist from Business Report asked whether it was true that Cabinet had considered a new Chief Executive Officer (CEO) for South African Airways.
A] Minister Erwin said that it was true, and that Cabinet had deliberated on the issue. There would be a full announcement the next day.
Q] A journalist from Sunday Times asked when the decision to create an inflation committee had been taken
A] Minister Mpaphlwa said that reference had been made in the May briefing.
Q] The journalist from Business Report then asked how the Minister’s responded to the accusation that the Joint Reserve Bank Committee was an attempt to interfere with an independent body.
A] Minister Mpaphlwa said that it was not an issue of Treasury trying to interfere. Throughout the world, there were formal interactions between the Treasury and the Reserve Bank. The South African Reserve Bank published its third quarterly report in September, and Treasury produced its Budget Policy statement at the end of October. There was a need for co-operation between the two groups.
A] Minister Erwin said that Treasury and the Reserve Bank needed to interact to assess inflation. It was simply institutionalising the basis of inflation targeting.
Q] A journalist from SABC asked for information on the discussions of the regulatory pricing framework.
A] Minister Mpaphlwa said that this regulatory framework had been taken to Cabinet.
A] Minister Erwin said the regulatory pricing framework would enable better harmonisation of governance. The process was being led by Treasury.
Q] A journalist from SABC asked for the Minister’s opinion on import parity pricing.
A] Minister Mpaphlwa said that import parity pricing denied many opportunities for economic growth and job creation. If this was scrapped, there would be serious advantages for the steel industry. It had not previously been able to take advantage of its status as a low cost producer. This would release considerable potential. More information on this would be released at a later date.
Q] A journalist from Financial Mail wanted to know the Minister’s evaluation of borrowing and guaranteeing. She wanted to know how the figure of R50 billion related to the R100 billion mentioned in the ANC Manifesto.
A] Minister Erwin said they needed to minimise guarantees. The R100 billion was simply a ‘ballpark figure’ in the Manifesto. The mentioned R50 billion was contained within the R100 billion.
Q] A journalist asked for further clarity on the position of shareholding.
A] Minister Matsepe-Casaburri said that it was within the 51% of shares that the changes were taking place. It was no longer 13% of the total shares, but was now 12.5% of the 51% of the shares. This meant that the shareholding was being halved.
A] Minister Erwin said that this restructuring of shareholding had little impact on the structure of the deal. The NEXUS litigation had nothing to do with this.
Q] A journalist asked whether the department expected further litigation
A] Minister Matsepe-Casaburri said she gathered from her Department’s legal advisors that the issue had been resolved and that there would be no further litigation.