President Ramaphosa: putting township and rural enterprises at the centre of economic growth in a post Covid-19 era
“The Constitution of the Republic of South Africa states that the President and the Deputy President must appear before the Houses of Parliament to answer oral and written questions from Members of Parliament,” writes
Ms Lusizo Makhubela-Mashele (African National Congress, ANC) asked the President:
In light of the fact that the South African economy and the economies of other African countries have been severely affected by the Covid-19 pandemic, (a) what measures has the government put in place to accelerate the recovery of the South African economy, and (b) how is the President coordinating the economic recovery in Africa as the Chair of the African Union?
President’s response: The global coronavirus pandemic is both a national crisis and an economic crisis, as we have acted to protect the health and the lives of all our people.
We have also had to limit the severe economic impact. Our economic response can be divided into three phases. The first phase began in midMarch, when we declared the coronavirus pandemic as a national disaster. What we did included a broad range of measures to mitigate the worst effects of the pandemic on businesses, on communities and individuals.
The measures included tax relief, the release of disaster relief funds, emergency procurement processes, wage support through the Unemployment Insurance Fund and funding to small businesses.
Towards the end of April, we realised that this pandemic was having a much deeper negative effect. This led us to embark on the second phase of our economic response, which was both economic as well as social, and this included a R500 billion support package to stabilise the economy and protect jobs. But it was also meant to support our people, who through their various economic activities were no longer earning an income, and this had to do with people in informal businesses but also included people who were getting social grants but the social grants had become insufficient. It also included unemployed people in our country. And to that
end, the measures that we implemented came up with temporary payments to social grant beneficiaries, a special Covid-19 grant of R350 a month for six months to the unemployed, and a loan guarantee scheme of R200 billion to support small and medium-sized enterprises.
It is worth noting that the R500 billion support package is worth around 10 and 11% of gross domestic product, which is larger than equivalent support measures announced by other emerging markets, and those countries that are in the G20. (The G20 is an international forum for the governments and central bank governors from 19 countries and the European Union.)
The third phase is a comprehensive economic strategy that will be aimed at driving the recovery of our economy as we emerge from the pandemic.
Given the massive impact that coronavirus is expected to have on jobs, our immediate task is to create employment. I’ve often said that we need to look at the post-Covid-19 economic landscape as being equivalent to a post-war economic landscape. So we have to do the extraordinary, and we will do this by embarking on a number of initiatives that will be aimed at creating jobs, and some of those will be expanding public employment, increasing investment in public infrastructure and services, and enabling greater job creation by the private sector.
Progress is being made within government to increase investment infrastructure with several major projects that are ready for implementation. The Presidency will be convening the Sustainable Infrastructure Development Symposium, which will bring together funders, policy makers, stateowned enterprises, academics and private sector people to look at the investment opportunities in infrastructure. We should be seeing infrastructure investment as a mobiliser of growth, and we want to source money, that is, significant investments from a number of sources, both private and public. And we see this as a significant part of the stimulus that our economy needs.
This pandemic has highlighted the vital importance of the informal sector and of small businesses in meeting the basic needs of our people. This informal sector, which other people describe as the second economy, in many ways has come to the fore in supporting the lives and livelihoods of our people during the lockdown. And we now have a much better view of the landscape of the small and mediumsized enterprise sector, and the more informal part of it.
Our programme of economic recovery needs to provide greater support to these enterprises, which provide income and employment for many young people, and at the same time we will implement key reforms that support long-term growth, these include measures to support the building of energy capacity reforms to improve our ports capacity, as well as efficiency and the licensing of high demand spectrum. We will also focus on measures to protect African economies and ensure that they also recover from the effects of the pandemic.
In my capacity as the
Chairperson of the African Union (AU), I have held several engagements with the leaders and institutions in the international community, to call for a comprehensive economic package to provide economic relief to African economies.
This package would need to include debt cancellation, “debt standstill” as well as interest waivers, which will provide poorer countries the much-needed fiscal space to deal with the economic ramifications of the virus. (A debt standstill is an agreement between the creditor and the debtor for a temporary pause on debt repayments.)
We have also appointed six AU envoys to solicit financial support for the continent from a number of financial support centres, G20 countries, international organisations and many others. They’ve also made significant progress in mobilising material support for African countries to respond to the pandemic. To date, a total of US$61 million (R1.079 billion) has been pledged for both the AU Covid-19 response and the AU Centre for Disease
Control and Prevention.
It will take a long time to recover from the economic loss due to this virus, and although we do not know yet what the full impact of the pandemic is, we are starting that recovery now. It is important that we approach this recovery through the balanced strategy that we have decided on, to save lives on the one hand, and also to preserve livelihoods on the other hand. It becomes a very delicate balance, but it is a balance that has to be struck, because in the end, we cannot overemphasise one at the expense of the other.
The Leader of the Opposition (Democratic Alliance), Mr John Steenhuisen, asked the President:
What are the relevant details of the scientific risk assessment that the government’s National Coronavirus Command Council (NCCC) allegedly relied on for the modelling used to predict the number of deaths and the projected number of deaths, which led to the announcement of the hard lockdown on 23 March? He
also asked how scientific evidence since March, in respect of the modelling with regard to any changes in the projected number of deaths, has influenced the decisions of the NCCC pertaining to the institution of the national hard lockdown?
The decision to institute a nationwide lockdown was informed by, among other things, epidemiological analysis based on the available evidence of the rate at which the number of coronavirus cases were increasing.
This provided modelled estimates of more than one million infections at peak. Recently, the country’s Covid-19 modelling consortium has generated optimistic, as well as pessimistic estimates of between 3.4 million, and 3.7 million cases, respectively, of infections by the 1st of November this year.
The initial estimates pointed to the need to act quickly and decisively before the epidemic curve reached what scientists call the “inflection point”. The
“inflection point” is when the curve changes from a slow and steady increase in cases, to one with an exponential growth, almost an explosive growth. South Africa had an opportunity to act early before its inflection point has been reached. We made the decision to implement a lockdown when there were 274 confirmed cases in the country. At that point scientists estimated that South Africa already had more than1 000 cases, many of which had not been identified yet due to limited screening and stringent testing criteria.
By the time I announced the lockdown on Monday, 23 March, the number of confirmed cases had risen to 402, and by the time the lockdown took effect, on Friday 27 March, there were already 1 170 cases, in other words, we had seen an explosion.
A prolonged delay in implementing stringent measures would have meant that South Africa would have missed the wind of opportunity to achieve a significant flattening of the curve, this could have led to a runaway epidemic with potentially catastrophic consequences for our healthcare services. In the three weeks before the nationwide lockdown, the number of coronavirus cases were doubling every two days. During the course of the level 5 lockdown, cases were on average doubling only every 15 days.
Since we began the easing of the lockdown, during alert levels 4 and 3, the doubling time has been around 12 days. In other words, the lockdown enabled the country to start to flatten the curve, delaying community transmission for long enough to prepare our health facilities, and implement public health responses.
Mr Julius Malema (Economic Freedom Fighters) asked the President: (1) Whether his decision to ease the lockdown from alert level 5 to level 4 and level 3 within a short space of time was informed by scientific evidence. If so, how did the President find the specified scientific evidence presented to him different from the scientifically-based recommendation by the World Health Organisation, which advised that numbers of infections must be visibly declining before a lockdown could be eased.
If not, (2) whether he had been lobbied by any persons to ease the lockdown for businesses to resume operations, despite the lack of preparedness by employers of their workplaces, and the public health care services. If so, what are the names of the people who lobbied him, and on whose account he will have to take personal responsibility for the hundreds who will die of Covid-19 due to the premature opening of the economy?
President’s reply: As I indicated in the earlier reply, our response to the coronavirus pandemic has been informed by the advice of our scientists, the experiences of other countries, and the guidance from bodies like the WHO, and the Africa Centres for Disease Control and Prevention. Much of the scientific input we have received has come from the Ministerial Advisory Committee on Covid-19, which was established by the Minister of Health.
Through the course of the pandemic, the Ministerial Advisory Committee, which brings together scientists, clinicians and researchers from a range of relevant disciplines, has assisted the government in various areas of the response. The committee helped develop the country’s eight-phase strategy, in which a strict lockdown was just one phase, with specific objectives and a finite time frame.
In deciding on when to begin the gradual and systematic easing of the lockdown, the government was guided by the views of the scientists, the experiences of other countries, and wide-ranging consultations. It also took into account the economic and social disruption caused by the lockdown, and the devastating impact it was having on people’s incomes and livelihoods. In providing guidance, the Ministerial Advisory Committee used the level of community transmission as the basis for determining the state of the pandemic in the country.
At that time, the proportion of coronavirus tests that were positive had been consistently low for a long time, and had remained in a narrow range of 1.5% to 3.5% for several weeks in all parts of the country, except in the Western Cape. In arriving at this decision, due consideration was given to the criteria suggested by the WHO for countries to transition from lockdown to the re-opening of normal social activities. These criteria are:
Firstly, that disease transmission is under control.
Secondly, that health systems are able to “detect, test, isolate and treat every case and trace every contact”. Thirdly, that hotspot risks are minimised in vulnerable places, such as nursing homes.
Fourthly, that schools, workplaces and other essential places have established preventive measures. Fifthly, that the risk of importing new cases “can be managed”.
President’s reply: In determining the appropriate response to the global coronavirus pandemic, the government has formed, on the basis of the advice of scientists, by observing the experiences of other countries, and from the guidance of the World Health Organisation (WHO), as well as from the Africa Centre for Disease Control and Prevention.
Lastly, that communities are fully educated, engaged and empowered to live under a new normal.
In an advisory to the Minister, the Ministerial Advisory Committee noted that some of the World Health Organisation’s criteria might not be appropriate for South Africa. Unlike several other countries, South Africa deliberately implemented a lockdown early in the progression of the disease as a strategy to delay transmission.
We did this knowing that we would not be able to bring transmission under control by the time we had to ease the lockdown, but that it would give us the time we needed to strengthen our health system and put a comprehensive public health response in place. The WHO has supported South Africa in this approach.
In considering the transition from alert level 5 to alert level 4 and subsequently
to alert level 3, I engaged with numerous stakeholders, including business, labour, community representatives, political party leaders, premiers, mayors, traditional leaders, and the religious sector, among others, as part of the government’s consultation process.
As the National Coronavirus Command Council, we remain committed to consult widely with diverse stakeholders in taking decisions that will both protect the lives of our people, and support their livelihoods.
Mr Faiez Jacobs (ANC) asked the President:
In light of the United Nations’ survey that had found that approximately three million workers who work in the informal sector will require assistance to compensate for loss of income due to the impact of Covid-19, and given the efforts of the government, what will be the President’s policy directives to the Department of Small Business Development and small, medium and micro-enterprises (SMMEs) that will strike a balance between saving lives and livelihoods in achieving the National Development Plan’s target of creating 9.9million new jobs, which will constitute 90% of all new jobs by 2030?
President’s response: Just before the coronavirus outbreak in South Africa, Cabinet had approved the Township and Rural Entrepreneurship Programme. This programme is aimed at putting township and rural enterprises at the centre of economic growth.
The pandemic has assisted the implementation of this critical intervention, which seeks to bring marginalised people and areas into the mainstream economy.
As part of our package of responses to the pandemic, we have been providing financial and non-financial assistance to the informal sector to cushion workers from the economic effects of Covid-19. We have also taken measures to support households that rely on income from informal businesses by topping up social grants over a six-month period, and by introducing a special Covid-19 grant of R350 a month over six months for unemployed people.
Financial assistance to informal businesses has taken the form of grants, loans and credit facilities that owners of informal businesses can access to sustain their livelihoods. The non-financial interventions include business development support services that help informal businesses to improve their business management capabilities. This will assist informal businesses, should they wish, to make the transition to SMME businesses in the formal sector. This would make it easier for them to benefit from government incentives, SMME programmes and procurement opportunities.
The Department of Small Business Development has introduced programmes targeted at specific sub-sectors of the informal economy. To cite some examples, over the medium-term these programmes aim to support about 100 000 spaza shops and general dealers, 50 000 artisans’ businesses, 15 000 hairdressers, beauticians and other personal care businesses, 50 000 vegetable street vendors and butcheries, and 10 000 informal restaurants.
Other programmes include the Small-Scale Automotive Aftermarket Support Scheme to support 5 000 informal businesses over a period of 12 months, and the Bakeries and Confectioneries Support Programme, targeting 3 500 businesses over 12 months. Some of these programmes have already been implemented and are gaining traction.
Through these programmes, which prioritise black-owned, youth-owned and femaleowned SMMEs, thousands of jobs have been saved and a significant number of SMMEs have been kept in business.
Mr Narend Singh (Inkatha Freedom Party) asked the President:
Whether, with reference to the President’s reply to oral question 2 on 7 March 2019, in which he welcomed as refreshing the idea of establishing an independent
Chapter 9 institution, which will explicitly deal with the prevention, combating, investigation and prosecution of grand corruption, and given the challenging and uncertain times the Republic is under, the billions of rands allocated for government spending in response to the Covid-19 pandemic, and the opportunities for corruption this creates for criminal elements in the public service, has the President found that it is now more important than ever to establish such a Chapter 9 institution? If not, what is the President’s position in this regard? If so, what are the further relevant details?
According to research
the commissioned by Department of Small Business Development, the informal sector has a central role to play in the South African economy as it accounts for 18% of total employment, and contributes towards the livelihoods of millions of people.
President’s response: There are sufficient law enforcement agencies to deal with incidents of corruption. These include institutions like the National Prosecuting Authority (NPA), the Directorate for Priority Crime Investigation
in the South African Police Service and the Special Investigating Unit.
The Office of the AuditorGeneral and the Financial Intelligence Centre also play important roles in detecting
instances of corruption.
We have also established the NPA’s Investigating Directorate to focus on corruption cases arising from the Zondo Commission of Inquiry into State Capture and other commissions. We also have a progressive legislative framework for addressing the escalating number of investigations, prosecution and trials of serious forms of corruption. These include the Prevention of Organised Crime Act and the Prevention and Combating of Corrupt Activities Act.
I am advised that the Justice, Crime Prevention and Security Cluster is undertaking work to revamp the criminal justice system, which will include the strengthening of the governance arrangements, intelligence-driven and prosecution-led investigations and mechanisms for the recovery of ill-gotten proceeds.
We therefore take the view that the establishment of a new independent Chapter 9 institution to focus on grand corruption is not necessary at this stage. However, we should continue to consider all available options to ensure that we eradicate corruption across society.
Dr Pieter Groenewald (Freedom Front Plus) asked the President:
With reference to the
President meeting with the SA National Editors’ Forum on 31 May 2020, during which he stated that the Covid-19 pandemic offers the Republic a golden opportunity to restructure the economy, how does he intend to (a) restructure the economy in order to be more inclusive, and open up the economy to alleviate poverty, and (b) expedite the land reform process for a more productive economy without weakening the fiscal position of the Republic?
The AuditorGeneral will be taking additional measures, including proactive auditing, to ensure the proper use of Covid-19 funding.
The initiative by Anglo American to donate land to the state is an indication of what is possible if we share a common vision as a country.
President’s response: Even before the coronavirus pandemic, South Africa’s economy has been experiencing low growth over a number of years. Despite significant progress since the advent of democracy, our country remains characterised by high levels of poverty, inequality and unemployment. The pandemic has exposed some of the structural fault lines in our economy, including the vulnerability of small businesses and those in the informal economy.
Therefore, as we repair the damage caused by the pandemic, we will be implementing measures to address the key structural constraints in the economy. These include the mismatch between skills produced and the new skills required in a 21st century economy, and the spatial patterns of development that keep millions of workers far away from workplaces.
We will also need to address the reality of a poorly developed small and medium business sector within an economy that has large concentration of market share and ownership in too few hands.We will need to provide access to capital for many young entrepreneurs, womenowned enterprises and black industrialists.
As we rebuild the economy after coronavirus, we will speed up structural reforms that can unleash enterprise and capitalise on the digital economy and the larger markets that are possible through the African Continental Free Trade Area.
Already, steps have been taken in a number of areas to address these challenges. These include the industry masterplans that have been developed in sectors such as automobile manufacturing, clothing and textiles, poultry production and the sugar industry. They include the reforms in energy policy and the decision to release spectrum in the market; and the competition market inquiries that are beginning to have an impact on data prices, access to trading spaces and health care provision.
If we are to achieve an inclusive economy, we need to deal with the historical injustices in relation to land ownership, access and use.
Expediting land reform for a more productive economy without weakening our fiscal position will require, among other things, a social compact between the state and private landowners on how to release
more land.
Another example is the Partners in Agri Land Solutions (Pals) initiative in the Witzenberg valley, where commercial farmers have been working with local communities and farm workers to promote land reform. The government is working with the agricultural industry to develop a sector plan, which will focus on growth areas such as the livestock, wool and grain industries. Recent auctions have highlighted livestock wealth among black farmers, which indicate that an inclusive, targeted initiative has the potential to transform the livestock value chain.
The release of state-owned land and post-settlement support has commenced. More than 100 000 hectares have already been allocated to successful beneficiaries, and the intention is to release all the remaining 700 000 hectares by the end of the financial year.
Transformation must be pursued with greater vigour so that we have more equitable outcomes and a greater number of jobs.
Above all, building a more inclusive economy will enhance long-term growth, productivity and development for all South Africans.