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President Cyril Ramaphosa presented his long-awaited economic recovery and reconstruction plan in Parliament on Thursday (15 October), in which he outlined extensively what the government will do in the coming years to lift South Africa’s economy from the brink. and create hundreds of thousands of jobs needed in the process.
While the president’s speech touched on the points economists and analysts wanted to hear, it lacked implementation details.
Instead, the president simply touched on the same talking points that have been raised since the February 2020 State of the Nation Address, the economists said, adding more conversations about what has become the hallmark of the government. led by ANC: plan, but not action.
“To be different, today’s speech needed to show a real grid and details about the implementation, that failed,” said Intellidex analyst Peter Attard Montalto.
“(The speech) lacks detail in important areas and, unfortunately, the approach to implementing the various elements of the strategy is not convincing,” said Business Leadership South Africa.
Despite obvious implementation problems, analysts noted that some segments are positive.
“The most encouraging part of the plan is the focus on fighting corruption. It is critical that the government deliver on this promise. It is the key to rebuilding public trust and building trust, ”said Nedbank’s economic unit.
“We welcome and agree with the president’s focus on jobs, growth, debt reduction and essential private sector engagement,” said Business for South Africa.
However, a clear call for speedy implementation of the various projects mentioned remains at the top of the list.
And as many analysts and economists responded, this is the only area where the government has a poor track record.
Here is what the economists and analysts thought of the presentation:
Intellidex: Policy is ‘fine’, but implementation credibility suffers
Intellidex analyst Peter Attard Montalto said the speech, in policy terms at least, was more good than bad.
The positives found in the plan to create jobs (albeit temporary, smaller-scale, and extended for longer) and the broader economic stimulus, particularly around tourism and making it easier for entrepreneurs to travel to South Africa, were marks of verification for the economy.
But other aspects of the plan, such as the president’s “unrealistic” energy targets, threatened to completely undermine recovery targets.
“The commitment to ‘achieve a sufficient, safe and reliable power supply in two years’ is completely unattainable, even with the best will in the world and an ideal policy, and in fact damaged the credibility of the whole speech,” said Attard Montalto .
The lack of details on how any of the plans will actually be implemented is a huge negative and points to the ‘same old conversation’ coming from the government, with no indication that political blocks will be lifted.
“Overall, the speech fell short of the bar where it mattered: implementation details,” said the analyst. “Our baseline remains that, in a simplistic way, ‘all reforms are happening’, only without the necessary speed and effectiveness of implementation.”
BLSA: It’s just the starting point
Business Leadership South Africa said the president’s speech did a good job of presenting a ‘concrete action plan’ for the road to recovery, but it is merely a starting point and lacks many of the details that companies were hoping for.
“Much of this cannot be implemented immediately, which is what we need, while lacking detail in some areas and based on unrealistic assumptions in others,” the group said.
The president’s goal of having reliable and stable power in two years is unrealistic, he said, given that a new Integrated Resource Plan needs to be drawn up due to underestimations in the 2019 document.
Meanwhile, infrastructure plans appear to be a long way off, and many projects still need to overcome viability hurdles and other red tape.
BLSA was optimistic about job creation and local manufacturing plans, saying these are positive steps that address more immediate needs. However, they also have problems, specifically that the jobs are temporary, with no clear plan on how to grow the economy to ensure more permanent work, and there is no real position to address the underlying problems that have led to the deterioration of the economy. local. manufacturing.
Sakeliga: ‘hollow’ plan, while restrictions remain
The Sakeliga business group said the government cannot speak of recovery as it continues to actively restrict businesses through the state of disaster and lockdown regulations.
“Recovery cannot be based on continuing the state of disaster and increasing taxes, government spending and government intervention,” said CEO Piet le Roux.
“The ‘recovery plan’ is flawed because, once again, it places the government at the center of economic development, instead of reserving that space for the private sector. In any case, this is nothing more than a plan to expand the government, ”he said.
The group said it is unthinkable that other business groups such as Business Unity South Africa (BUSA) and Business for South Africa (B4SA) would provide unconditional support for the plan when it enforces the government’s current trajectory.
“If the government wants to avoid a crisis, it must change course, not accelerate,” he said.
He expressed some support for some aspects of the plan, but said that these are outliers and that, in terms of implementation, “little has resulted from the government’s previous commitments in this regard.”
B4SA: Good plan, now we have to implement it
Business for South Africa, which contributed to discussions on the recovery plan at Nedlac, said it was happy with the results presented by the president.
He said the next step is to move to the immediate implementation of the plan, with clear deadlines.
He said that the four pillars highlighted by the president are aligned with the discussions held between all social partners, facilitated by Nedlac, adding that companies are committed to supporting these plans if they are implemented efficiently and transparently.
“Now we urgently need to implement the recovery plan, give effect to the structural reforms that have been outlined, continue to tackle corruption in the public and private sectors, and rapidly increase state capacity.
“All of this is necessary for South Africa to attract the necessary investment, create sustainable jobs and reactivate and sustain significant and inclusive economic growth,” he said.
SEIFSA: There is nothing without implementation
The chief economist of the Southern African Steel and Engineering Industries Federation, Michael Ade, said the economic recovery plan depends on implementation, without which, whatever goals the government is trying to achieve will crumble as it continues. increasing job losses.
The group pointed to the latest employment data released in the latest Stats SA Quarterly Employment Survey, and said continued job losses run counter to any recovery plan.
“(The recovery plan) needs all productive hands to go to work to ensure success,” Ade said.
“The concern is that as businesses continue to grapple with cash flow challenges, with no outlined implementation plan regarding the novel economic recovery plan in sight, and amid the ongoing coronavirus pandemic, it is difficult to prevent an immediate end to the trend of poor short-term employment figures. “
While policy makers are making ‘commendable efforts’, on paper, to curb unemployment and reduce difficult business conditions, there is always a gap in the coordination of the activities of relevant government departments or agencies. , causing delays in implementation, said economist.
Nedbank: South Africans have been asked to give a leap of faith
Nedbank said the president’s plan sets out some bold goals, but in effect has asked South Africans to take a leap of faith that somehow things will be different this time.
The recovery plan hinges on a massive infrastructure campaign, which the government hopes to leverage South African pensions to fund. Nedbank said that by changing Regulation 28 of the Pension Fund Law, the government will be able to obtain funds for some of its plans.
While this is not unique to South Africa, and has even been recommended by the International Monetary Fund’s Fiscal Monitor, “what is problematic in the case of South Africa is the government’s poor record of delivering infrastructure on time and on budget.” said the bank. .
“The returns on public investment in South Africa are not only low, but in many cases negative. Medupi and Kusile are excellent examples. “
Regarding the other measures in the plan, the bank is more optimistic about measures to fight corruption, saying that the rest of the plan’s effectiveness will depend on how quickly each project can be implemented.
“However, the central feature of the plan, the infrastructure boost, will be difficult for the government to take off.
“Even if the government succeeds in overcoming its long-standing skills and systems limitations in project management, the state will still have to find a solution to the skills exodus and diminished capacity within the construction sector,” he said.
Read: This is South Africa’s economic recovery plan, which includes the creation of 800,000 new jobs.
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