Cabinet talks zero in on growth, jobs crisis

Statistics SA data on Tuesday shows manufacturing production contracted in the first quarter

Manufacturing data pointing to the dire state of the economy added to pressure for ministers to find solutions to the country’s jobs and growth crisis.

The start of a two-day cabinet lekgotla on Tuesday coincided with the release of Stats SA data showing that manufacturing production contracted in the first quarter.

Mining and retail numbers due next week may provide a clearer picture, probably killing off any prospect of SA meeting President Cyril Ramaphosa’s already ambitious target of 3% growth for 2018 — which is well above the predictions of the Treasury and the Reserve Bank.

“You still need to see a spectacular performance in the mining sector and reasonable growth in the retail and motor vehicle sectors, as well as the services sectors,” said Nicky Weimar, a senior economist at Nedbank. She described the possibility of a recession, defined as two consecutive quarters of negative growth, as still being high. “One negative print could derail it all.”

The news comes at a tricky time for Ramaphosa, who is trying to impose his authority on the country and the ANC as the initial euphoria that accompanied his election is dwindling amid a weak economy and a jobless rate that is nearing 30%.

The discussions at the lekgotla are set to hone in on the economy and emerge with a stimulus package for growth and employment.

A shrinking economy may also attract the attention of ratings agencies, who are already concerned about the sustainability of the country’s finances due to a weak economy, and therefore tax collection. The fiscus also faces risks from financial crises at stateowned enterprises, which hold billions of rand of debt guaranteed by the state.

Communications Minister Nomvula Mokonyane on Tuesday said the government was determined not to “reinvent the wheel” during the lekgotla.

But reinventing the wheel is the very mandate the cabinet received from the ANC last week, when the party decided to amend the constitution to expropriate land without

compensation. Ramaphosa said last week the cabinet would emerge with details on a stimulus package after the lekgotla.

Mokonyane said part of the stimulus package included providing support for the agricultural sector to boost productivity and ensure food security.

She said the government viewed land expropriation without compensation as part of the growth and transformation of the economy, with its primary objective being to ensure the state meets the imperatives of the constitution and promotes prosperity and transformation for all South Africans.

The lekgotla started with an address by Ramaphosa and is expected to receive a fiscal overview of the country’s economic status from finance minister Nhlanhla Nene.

Investec economist Annabel Bishop said while the risk of a recession was “elevating”, she still expected weak economic growth in the second quarter on a recovery in retail sales.

“While we continue to expect no credit rating downgrades this year, the agencies’ patience with SA will likely wear thin sooner rather than later, particularly given the ongoing debt and financial issues at Eskom and some other SOEs.”

On Friday, Deputy President David Mabuza chaired the inaugural meeting of the interministerial committee on land reform after he was appointed to head the team of ministers by Ramaphosa in July. In a statement after the meeting, Mabuza’s office said a panel of experts would be appointed by Ramaphosa to assist the government to provide a “unified perspective on expropriation of land” in the “wider context of persisting land inequalities and unsatisfactory land and agrarian reform” as well as urban land development since 1994.

The panel would also provide a diagnosis of the challenges and critically assess limitations with laws, policies and their implementation to date.

The committee also agreed that the approach to land reform should be based on three elements: increased security of tenure, land restitution, and land redistribution.

“This would be pursued without undermining the productive use of land that is already restituted and redistributed, thereby ensuring that this process does not negatively affect economic growth and agricultural production,” the statement said.