Analysts agree with the Democratic Alliance's (DA's) suggestion that government sell its stake in Telkom and other "non-strategic liquid assets" as a way to raise revenue for the country.
This as finance minister Pravin Gordhan prepares to deliver his 2016 budget speech tomorrow.
DA MP and shadow minister of finance, David Maynier, said in a press statement ahead of the budget that the minister "should pursue aggressive fiscal consolidation" as a way to deal with the risk of a pending ratings downgrade.
Maynier says rather than having tax increases in the next financial year, government should sell non-strategic liquid assets, including its almost 40% stake in Telkom, as well as other immovable assets such as land and buildings -"which could raise billions of rands in revenue".
ICT veteran Adrian Schofield agrees government should sell assets not essential to service delivery ? including Telkom.
"Selling Telkom was always a good option but it does not fit into the ANC philosophy of state control of the communications infrastructure. Since Telkom became a listed company, it makes even less sense for government to hang on to their shares," says Schofield.
Telkom's integrated financial report for the year ended 31 March 2015 shows government owns a 39.76% stake in the telecoms operator, while the Public Investment Corporation owns another 11.65%. Government's stake would be worth over R11 billion if sold today, with the share price sitting at around R51.52 per share in early trade.
Ovum senior analyst Richard Hurst says the privatisation of Telkom would certainly make sense and "would also give further credence to president Zuma's statement that South Africa is open for business".
"In the first instance, Telkom would be able to function just like any other player in the market, leaving government to play the role of facilitator. In the second instance, there would be the massive cash injection the government would need right now to get other projects and plans off the ground," adds Hurst.
Maynier says the sale of government's stake in Vodacom was a good start, raising R25.4 billion in revenue in 2015/16.
"However, we believe that any future revenue raised through asset sales should be 'ring-fenced' and spent on the development of infrastructure to boost economic growth and job creation in South Africa."
Hurst says cashing out of Telkom would be a short-term solution for government, but if manged correctly, could go a long way in terms of increasing the penetration of broadband services, and increasing the country's ability to engage in the global e-service market.
"The government needs both short- and long-term solutions, so a cash injection to ease immediate cash flow needs is a reasonable stop-gap while more fundamental changes to the structure of the fiscus take effect," says Schofield.
"The ANC still clings to the dogma that government must have control of the infrastructure and this is the obstacle to sales of the remaining Telkom shares," he adds.
Over the years, government has made it clear it does not want to relinquish its control of Telkom or let other big shareholders take control. Cabinet even blocked a possible R3.3 billion deal with Korea's KT Corporation in 2012.
Budget expectations
Maynier admits minister Gordhan "is in a tight spot with very little fiscal space, and even less political space, available to respond to the economic crisis and the risk of a sovereign ratings downgrade in South Africa".
The DA outlined five key challenges going into the budget: dealing with high levels of unemployment, avoiding a sovereign ratings downgrade, providing relief to poor households, dealing with the student fees crisis, and providing drought relief.
Analysts, however, are looking for more clarity on ICT-related plans and improvements.
"We should be focusing on using technology to create efficiencies across the country; in essence, we have to avoid duplication of effort and waste of resources," says Hurst.
Schofield says in his view, cutting government costs and boosting the economy is easy if you "prosecute corruption, eliminate nepotism, reduce the number of departments, speed up procurement processes, and implement plans instead of talking about them".
Hurst adds that another way to inject some revenue into the government fiscus would be to finally allocate 4G spectrum. He says this would give government coffers a boost and unlock SA's mobile broadband market, "thus empowering more people to participate in the digital economy".
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