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President Cyril Ramaphosa presents the Economic Recovery and Reconstruction Plan to Parliament on October 15, 2020 (Photo: Flickr / GCIS)
Job creation is the central theme of the Economic Recovery and Reconstruction Plan presented by President Cyril Ramaphosa at a joint session of Parliament on Thursday. There is a strong focus on public works, but there were some dog whistles to the private sector, inviting it to the party. Many of the promised jobs are already being created.
“Job creation is at the center of the Economic Recovery and Reconstruction Plan. We must get our people back to the jobs they lost during the pandemic, “said President Cyril Ramaphosa. In the second quarter of 2020, more than 2 million people lost their jobs.
“Our goal is to do this primarily through a major infrastructure program and large-scale employment stimulus, coupled with an intense push for industrial localization and expansion,” said the president, with a commitment to create 800,000 jobs in the “immediate term”.
The word “create” in the promise of 800,000 jobs may well be crucial here, as well as the emphasis on getting those who lost their jobs due to the pandemic back to work. Because the latter, in fact, is probably happening and largely due to the private sector.
The economy had the mother of all contractions in the second quarter, 51% on an annualized and seasonally adjusted basis, or 17.1% in the three months to the end of June. But according to the first measure, some analysts estimate that it may have recovered between 40% and 50% in the third quarter, since the easing of the blockade restrictions allowed more economic activity.
During this period, many people would have been re-employed by companies that managed to stay afloat during the shutdown. This would include jobs in the restaurant, bar and retail sectors that are labor intensive. What was the waitress who served you doing four months ago last night? – and also the construction sector. Construction sites in places like Sandton, which were emptied during the full shutdown, are buzzing again.
So potentially tens, if not hundreds, of thousands of jobs have already returned. TThe rebound in the third quarter can be highlighted as a clear example of “jobless growth”, or at least breakneck growth that failed to “create” jobs but simply rehired many of those who had temporarily lost their jobs. during difficult phases of the blockade.
Then, the number to measure this commitment will be 800,000 new jobs, such as those that were created or did not exist before, in the immediate term. For that, Ramaphosa knows that it has to rely heavily on the private sector. And while there was a lot of focus on public works and infrastructure, there were some dog whistles that invited the private sector to the party.
“The Infrastructure Fund will provide R100 billion in catalytic financing over the next decade, leveraging up to R1 trillion in new investment for strategic infrastructure projects.” Most of that “new” investment will likely come from the private sector; the government simply cannot afford it.
“Where does the money for infrastructure come from? If it is from the private sector, it would need returns, so the roads to be built will be toll roads and the private houses, to sell or rent. If there is water and electricity, of course, that already has income. But it is clear that it will mean at least some privatization of the infrastructure that the government provides, ”said Mike Schussler of Economists.co.za. Business Maverick.
Other dog whistles included a promise to crack down on corruption and crime (security costs are huge here), including a specific promise to hit “criminal elements in our country who have taken over the illegal occupation of construction sites. and they request protection money from the companies. ” Some construction sites are buzzing again, but is protection money part of your cost base?
More generally, on that front, Ramaphosa’s reforms were being accelerated “to lower the cost of doing business and lower barriers to entry.” It’s been said before, but dog whistles are like this: the goal, after all, is to keep the dog’s attention. In this case, maybe you can even start wagging your tail a bit.
“Current terms for mining, prospecting, water and environment licenses will be reduced by at least 50% to facilitate new investment,” Ramaphosa said. That is a tangible goal that will be welcomed by the mining industry.
Ramaphosa also promised that “the release of high-frequency spectrum by March 2021 and the completion of digital migration will reduce data costs for businesses and households.” There are only five months left and those deadlines are important. And again, there will be a heavy reliance on the private sector.
As there will be for the new power generation, which is crucial in the face of the biggest constraint for new private investment in the economy: Eskom. Fast track permits will only go so far if mining companies don’t have reliable power to carry out projects.
To that end, the plan aims to “unlock another 2,000 MW of emergency supply within 12 months” and “allow power generation for own use.” This is clearly crucial, but similar promises have been made before.
And then there was this jolt: “We are accelerating the implementation of the Integrated Resource Plan to provide a substantial increase in the contribution of renewable energy sources, battery storage and gas technology.
“This should bring around 11,800MW of new generation capacity to the system by 2022. More than half of this power will be generated from renewable sources,” Ramaphosa said.
That’s a lot of new generation capacity, about a quarter of what currently exists on paper, if not on the grid, and 2022 is a tight schedule. This clearly recognizes the urgency of the energy crisis, but it will be a difficult task to achieve without the private sector.
As the government tries to limit its own wage bill and spending, it will need the private sector to create many of those 800,000 jobs. He is sending dog whistles that is inviting him as a companion. But if there is no bone, don’t expect the dog to keep listening. BM
