South Africa should sell state-owned companies to improve efficiency and provide a better platform for economic growth, Templeton Asset Management Ltd. Executive Chairman Mark Mobius said.
State-owned enterprises, which supply Africa's biggest economy with power and run its railways, have been mired in management disputes, funding shortfalls and wage protests.
"The state-owned enterprises have not met the fast-growing needs of the population," Mobius, who oversees about $34 billion in emerging markets, said by phone from Hong Kong on July 5. "South Africa has been moving too slowly. They are not moving at the pace that is required to prevent major political upheavals."
The world's most productive platinum and ferrochrome mines were temporarily halted in January 2008, after funding for state-owned power utility Eskom Holdings Ltd.'s expansion projects had been blocked, leading to five days of power outages. In May, an 18-day wage strike at state-owned logistics company Transnet Ltd. crippled exports until management offered workers an 11 percent salary increase.
"If you don't have electricity, you can't grow," said Mobius. "It's all tied together."
Transnet, Eskom, South African Airways and the South African Broadcasting Corp. all struggled for months to find permanent chief executive officers. Eskom has 135.1 billion rand ($17.6 billion) in outstanding bonds and loans, according to Bloomberg data. Transnet has 30.1 billion rand.
Power, Education
Electricity supply, education, housing and poverty alleviation "are some fundamental problems that South Africa has to address," Mobius, 73, said.
The Congress of South African Trade Unions, which is in alliance with the ruling African National Congress, supported President Jacob Zuma in his successful bid to become party leader in 2007 and ushered him into the country's top office.
Just over a fifth of South Africa's 48 million people live on less than 283 rand a month, down from 31 percent in 2005, according to the presidency.
South Africa's housing backlog has leapt to 2.1 million from 1.5 million in 1994, Human Settlements Minister Tokyo Sexwale said in April. About 12 million people need better shelter, he told parliament.
Risks
The national schools pass rate has dropped for the last six years even as government spending on education increased more than fourfold since the first all-race elections in 1994. The country will next year start phasing out the current outcomes- based education system, which was introduced in 1998 and has been blamed for the failure rate, Basic Education Minister Angie Motshekga said yesterday.
Zuma, South Africa's fourth president since the end of white minority rule, has emphasized the need for government to move faster to improve education, housing and poverty alleviation.
Business ownership and labor laws risk being tightened if poverty issues aren't addressed, discouraging companies from taking on staff and investors from putting their money into entities operating in the country, Mobius said.
"The labor movement could get out of control," Mobius said. Should these laws be changed "in a way that disenfranchises investors, then you've got a problem."
'Hesitant' Recovery
South Africa's economy is recovering from the first recession in 17 years, returning to growth in the third quarter of last year. The economy expanded an annualized 4.6 percent in the first quarter, while inflation slowed to 4.6 percent in May from 8 percent in the same month a year earlier.
"The recovery is taking place, but it is hesitant, fragile and uneven," South African Reserve Bank Governor Gill Marcus said in Johannesburg today. "Its sustainability will be dependent on the global recovery in general and in Europe in particular."
The ANC will discuss the nationalization of the country's mines at a policy conference in September at the behest of its youth wing, which supports state control in new mining ventures.
"It's a concern to anybody investing in South Africa," Mobius said. "If what the youth league is saying comes to pass, then it's a very worrying situation. That would discourage any investment."
The government isn't planning to introduce nationalization laws Mines Minister Susan Shabangu has said.
By Franz Wild
Bloomberg
--Editors: Ana Monteiro, Philip Sanders.
To contact the reporter on this story: Franz Wild in Johannesburg at fwild@bloomberg.net
To contact the editor responsible for this story: Peter Hirschberg in Jerusalem at phirschberg@bloomberg.net.
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