Ramaphosa’s “unrealistic” economic master plan needs the private sector for it to work
Implementation is again a sticking point, say analysts, business and economists alike.
The Economic Reconstruction and Recovery Plan presented by President Cyril Ramaphosa to a joint sitting of Parliament on Thursday has been dissected and found to be wanting. Private-sector economists and businesses are cautiously supportive and welcome the focus on reforms. These include commitments to reduce business costs, streamline regulatory requirements and allow the private sector to self-generate more power. But trade unions outside the ANC alliance feel ignored.
But its ambitious timelines, while laudable, are not regarded as remotely achievable. The plan calls for the unlocking of “2,000MW of emergency supply within 12 months” and “11,800MW of new generation capacity” by 2022. Like smart cities and bullet trains, this is the stuff of pipe dreams. To take one example: bullion producer Gold Fields has been waiting three years for approval for a 40MW solar project at its South Deep mine to reduce its reliance on unreliable Eskom. Now, magically, almost 12,000MW is going to be added to the grid in two years?
The focus of the should be jobs, as it should be. Unemployment in South Africa is a national tragedy and emergency. And the target of creating 800,000 jobs will not happen without the private sector – the state simply cannot do it. Economists say the infrastructure drive will have to be led by the private sector, which could mean unpopular measures such as toll roads. And investors will face a plethora of requirements, such as buying local and BBBEE targets.
One hopes that the public works/infrastructure drive does not fizzle into a charade, with hundreds of thousands of unemployed people filling potholes for a few months for pathetic wages.
ECONOMISTS AND ANALYSTS WEIGH IN
Razia Khan, chief economist Africa and 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 trajectory of economic growth to date, and the absence of meaningful reform prior to this, the question may well be, why commit?
“While the Ramaphosa plan outlined a number of areas for economic revival, it was thin on the detail of financing. Perhaps most importantly, it reiterated the need for smaller deficits in order to bring down debt ratios, suggesting that the Medium-Term Budget Policy Statement will not deliver any negative surprises to the market. But questions around whether South Africa will succeed in reviving growth persist. Ultimately, a higher growth rate will be the best determinant of debt sustainability, even more so than fiscal retrenchment, and with fewer social costs. It is good to see some reforms – such as in renewables – now accelerating. The question though is what took 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 on the plans. The extra three months of payments for the unemployed is good but must then end in January as we in SA need to also make sure we have money to pay for all these things. It was, however, still a bit of 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 the private sector, it would need returns so the roads to be built will be toll roads and the houses private to sell or rent. If water and power, of course, that has an income already. But it is clear that it will mean at least some privatisation of infrastructure that government provides.”
Shawn Duthie, managing director of the Africa-focused consulting firm Inyani Intelligence
“There wasn’t any substance – it was all window dressing. Creating 800,000 new jobs would obviously be great, even though it is less than half of the jobs lost during the lockdown, but these jobs are likely to be shortterm or contractual rather than permanent as a lot of these jobs are to be created via infrastructure development. The fact that the vast majority of these newly created jobs will be funded by the government also brings up the same questions – how are they going to pay for this? This is also contradictory to the government’s plans in February to try to cut the bloated public sector, whose wages already account for more than half of government spending. “Ramaphosa’s plans to alleviate South Africa’s energy issues were also very grand and it would be great to have 11,800MW of new power on the grid in two years ... but how is this going to happen? Will he speed up Eskom’s reforms? No – he pledged to address Eskom’s debt but there were no hard promises to actually fix the major issues at the electricity company, which means that it is unlikely that we’ll get anywhere close to the promised new power.”
Zwelinzima Vavi, South African Federation of Trade Unions general secretary
“Saftu is simply disgusted with the president’s attempts to pull the wool over the eyes of the public, pretending his new plan will lead to recovery and reconstruction – when so much of it reflects a Build Back Worse mentality.
“The most important point we are drawing from this plan, and that we anticipate will follow in two weeks at the Medium-Term Budget speech by Finance Minister Mboweni, is the dominance of the neoliberal world view, joined with corporate power through the traditional ‘minerals energy complex’ priorities for extraction of our wealth no matter the social, labour and environmental costs, worsened by financialisation. The desperate need to pull poor and working-class people out of our morass is being ignored. The need to prepare our children with a good education, the need to support the youth’s demands for climate-conscious policy, the need to end femicide and gender-based violence, and the need for publicly funded jobs to turn our economy, environment and society around – these needs are largely ignored.
“The statement represents a mere reorganising of past speeches, except in a few cases that leave us disturbed. The ‘cut and paste’ economic strategy follows previous jobs summit resolutions, the five accords signed at Nedlac on education and training, green economy, youth employment, local procurement, and collective bargaining accords. Once you read all of these you will come to one conclusion: the government lacks ideas and long ago reached a policy cul-de-sac. Government is refusing to make a clean break with neoliberalism and austerity that has simply helped to reproduce the quadruple crisis of poverty, unemployment, inequalities and corruption.”
Busi Mavuso, CEO of Business Leadership South Africa (BLSA)
“The Economic Recovery Plan sets out a series of steps that, on paper, will go far in kickstarting growth. But, as is often said, South Africa is a place good at making plans, but bad at implementing them. “Organised business, of which I am a part, has been highly active since the start of this crisis. Through Business for South Africa, many businesses volunteered to support government and the public through 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 mobilising global supply chains to sourcing personal protective equipment, to switching production to produce hand sanitiser, many businesses stepped quickly to the plate to deal with the most urgent challenges.
“The president’s plan reflects many of the issues that BLSA has highlighted that are constraining growth. Sorting out policy uncertainty around the Mineral and Petroleum Resources Development Act, improving the times to obtain water and environmental licenses, improved visa rules to attract skills and tourists, and the release of high frequency spectrum, have long been asked for by business and the president has set these as priorities that will unleash investment.
“The challenge facing the plan is its credibility. The public needs to believe that this time is different – that this plan really will be implemented. A transparent and accountable Cabinet is one that will earn the trust of the public that plans are being implemented, not just written.”