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President Cyril Ramaphosa presents the Economic Recovery and Reconstruction Plan in a joint hybrid session of Parliament. (Photo: Kopano Tlape)
Implementation is again a sticking point, say analysts, business people and economists alike.
First published in Daily Maverick 168
The Economic Recovery and Reconstruction Plan presented by President Cyril Ramaphosa at a joint session of Parliament on Thursday has been scrutinized and found wanting. Economists and private sector companies cautiously support and welcome the focus on reforms. These include commitments to reduce business costs, simplify regulatory requirements, and allow the private sector to generate more power on its own. But unions outside the ANC alliance feel ignored.
But its ambitious deadlines, while laudable, are not considered remotely achievable. The plan calls for the unlocking of “2,000 MW of emergency supply in 12 months” and “11,800 MW of new generation capacity” by 2022. Like smart cities and bullet trains, this is a pipe dream. To take an example: bullion producer Gold Fields has been waiting three years for approval of a 40MW solar project at its South Deep mine to reduce its dependence on the unreliable Eskom. Now, magically, are almost 12,000MW going to be added to the grid in two years?
The focus of should be employment, as it should be. Unemployment in South Africa is a national tragedy and emergency. And the goal of creating 800,000 jobs will not be achieved without the private sector; the state simply cannot. Economists say the infrastructure campaign will have to be led by the private sector, which could mean unpopular measures like toll roads. And investors will face a plethora of requirements, like buying local targets and BBBEE.
One hopes the public works / infrastructure campaign doesn’t turn into a sham, with hundreds of thousands of unemployed filling potholes for a few months over pathetic wages.
ECONOMISTS AND ANALYSTS PUT IN
Razia Khan, Chief Economist for Africa and the Middle East, Standard Chartered Bank
“For the Economic Plan to work, the private sector will have to be on board, because it is difficult to see what other sources of financing there could be. But for the private sector, given South Africa’s weak economic growth trajectory to date, and the absence of significant reform prior to this, the question may well be, why compromise?
“While the Ramaphosa plan outlined a number of areas for economic revival, it was sparse on the details of financing. Perhaps most importantly, it reiterated the need for smaller deficits to reduce indebtedness ratios, suggesting that the Medium-term Budget Policy Statement will not deliver negative surprises to the market. But doubts remain as to whether South Africa will succeed in reviving growth. Ultimately, a higher growth rate will be the best determinant of debt sustainability, even more than fiscal reduction, and with lower social costs. It’s good to see that some reforms, like renewables, are now accelerating. However, the question is why did it take so long to get here?
Mike Schussler, Economists.co.za
“It was better than I expected, but the question is, is it enough? We still need more meat in the plans. The extra three months of payments for the unemployed are good, but then they should end in January as we in South Africa also need to make sure we have money to pay for all these things. However, it was still a wish list rather than a plan and that makes me wonder about our ability to implement.
“Where does the money for infrastructure come from? If it is from the private sector, it would need returns so the roads to build 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. “
Shawn Duthie, Managing Director of Africa-focused consultancy Inyani Intelligence
“There was no substance, everything was a showcase. Obviously creating 800,000 new jobs would be great, although it is less than half of the jobs lost during the shutdown, but these jobs are likely to be short-term or contractual rather than permanent, as many of these jobs will be created through infrastructure development. The fact that the vast majority of these new jobs are funded by the government also raises the same questions: How are they going to pay for this? This also contradicts the government’s plans in February to try to cut back the bloated public sector, whose salaries already account for more than half of public spending. “Ramaphosa’s plans to alleviate South Africa’s energy problems were also great and it would be great to have 11,800MW of new energy on the grid in two years… but how is this going to happen? Will it accelerate Eskom’s reforms? No, he promised to address Eskom’s debt, but there were no strict promises to fix major problems at the power company, which means we are unlikely to get anywhere near the promised new energy. “
Zwelinzima Vavi, General Secretary of the South African Federation of Trade Unions
“Saftu is simply disgusted with the president’s attempts to poke fun in the public eye, pretending his new plan will lead to recovery and rebuilding, when much of it reflects a worse rebuild mentality.
“The most important point we draw from this plan, and which we anticipate will follow in two weeks in Finance Minister Mboweni’s mid-term budget speech, is the dominance of the neoliberal worldview, coupled with corporate power through the traditional one. ” The priorities of the mineral energy complex for the extraction of our wealth regardless of the social, labor and environmental costs, aggravated by financialization. The desperate need to get the poor and working class people out of our swamp is ignored. The need to prepare our children with a good education, the need to support young people’s demands for a climate conscious policy, the need to end feminicide and gender-based violence, and the need for publicly funded jobs to transform our economy, the environment and society. Around, these needs are largely ignored.
“The statement represents a mere reorganization of past speeches, except in a few cases that leave us uneasy. The economic ‘cut and paste’ strategy follows previous Labor Summit resolutions, the five agreements signed at Nedlac on education and training, green economy, youth employment, local procurement and collective bargaining agreements. Once you read all this, you will come to a conclusion: the government lacks ideas and has long since hit a political dead end. The government refuses to break with neoliberalism and austerity that have simply helped reproduce the fourfold crisis of poverty, unemployment, inequalities and corruption.
Busi Mavuso, CEO, Business Leadership South Africa (BLSA)
“The Economic Recovery Plan establishes a series of steps that, on paper, will help drive growth. But, as is often said, South Africa is a good place to make plans, but a bad place to implement them. “The organized company, of which I am a part, has been very active since the beginning of this crisis. Through Business for South Africa, many companies volunteered to support the government and the public during the crisis. B4SA created an extensive plan to guide a recovery, and Business Unity South Africa engaged with other social partners through Nedlac to develop a jointly agreed plan to present to the president. From mobilizing global supply chains to supplying personal protective equipment to shifting production to produce hand sanitizers, many companies rushed to tackle the most pressing challenges.
“The President’s plan reflects many of the issues that BLSA has highlighted that are limiting growth. The solution of the political uncertainty around the Mineral and Petroleum Resources Development Law, the improvement of the times to obtain water and environmental licenses, the improvement of the visa rules to attract skills and tourists, and the liberation of the spectrum high frequency, have long been requested by companies and the president has set them as priorities that will unleash investment.
“The challenge the plan faces is its credibility. The public must believe that this time is different, that this plan will actually be implemented. A transparent and accountable cabinet is one that will earn the public’s trust that plans are being implemented, not just in writing. ” DM / DM168
