Mixed response to Cyril’s stimulus plan
The EFF cried ‘white monopoly interests’ and the DA grumbled but the CEO Initiative is encouraged and Standard Bank called it constructive and necessary.
The DA said the plan was likely to have a “modest effect” on economic growth, and may be compromised by “reckless” economic policy.
On Friday morning, Ramaphosa announced the government would re-prioritise about R50bn within its existing budget to re-ignite economic growth and create jobs. He also announced the establishment of an infrastructure fund that is a core part of the package.
The package includes the new Mining Charter; major changes to visa requirements to boost the tourism sector; the development of industrial parks and township businesses and reforms in the telecoms industry.
DA’s finance spokesperson David Maynier said Ramaphosa was “forced to fast-forward and announce” a stimulus and recovery plan after his “new path” of economic growth, employment and transformation – which was supposed to emerge from a series of summits, conference and dialogues – was “too little, too late”.
Maynier said the impact on economic growth and job creation is likely to be modest given that the R50bn adjustment is a marginal increase in spending of about 6% on infrastructure over the medium term, and it was not “new money”, but part of the existing budget.
The R400bn infrastructure fund was also not new money and had already been allocated to expenditure on public infrastructure in the existing budget over the medium term between 2018-2019 and 2020-2021.
He said the plan is aimed at speeding up implementation of existing policies, rather than introducing new ones.
The EFF said Ramaphosa’s attempts to salvage SA’s economy with the plan, was “based on the preservation of white monopoly interests”.
“Ramaphosa has announced nothing new, but an attempt to repackage old neo-liberal economic plans that have proven futile; they have failed to grow the economy and create sustainable jobs,” the EFF said.
The CEO Initiative, however, said it supported the measures outlined by the president.
Jabu Mabuza, co-convener of the initiative, said the stimulus and recovery plan demonstrated the political will to make the necessary, tangible reforms that SA’s economy needed to perform at its optimal level and deliver change in the lives of the most vulnerable in its society.
Standard Bank economist Elna Moolman said Ramaphosa’s plan was constructive and contained many necessary elements.
“Financial markets, aptly, reacted marginally positively, with the rand and local bonds outperforming peers today.”
She said that from a fiscal and sovereign credit-rating perspective, it was critical that Ramaphosa repeatedly emphasises that fiscal spending would be “re-prioritised” rather than increased.
“Finance Minister Nhlanhla Nene indicated that the detailed work around the spending programmes that will be cut to fund the R50bn of re-prioritised spending, was advanced and that it would not negatively affect the fiscal metrics. We maintain our view that total fiscal spending will not be increased in the medium-term budget policy statement, and still expect limited fiscal slippage despite the pressure on revenues from economic weakness; we still expect no rating downgrade by Moody’s in October,” Moolman said.
NKC African Economics senior economist Elize Kruger said the first impression of the stimulus package was positive.
She said Ramaphosa “clearly acknowledged the limited fiscal space”. She was hopeful that, with Nene leading the process, it would be pulled off successfully. – With Asha Speckman
Despite the pressure on revenues ... we still expect no rating downgrade by Moody’s in October