Speaking at the Union Buildings on Friday, President Cyril Ramaphosa announced an economic stimulus package to pull the country out of recession and reverse the trend of increasing unemployment.
The wide-ranging plan was approved by Cabinet this week and includes policy and spending reforms. It centres on shifting R50-billion in the current budget from non-performing projects to areas that can boost the economy and provide jobs and establishing an infrastructure fund to boost labour-intensive investment.
“For several years our economy has not grown at the pace needed to create enough jobs or lift our people out of poverty,” said Ramaphosa.
“Public finances have been constrained, limiting the ability of government to expand its investment in economic and social development,” he added, also citing global factors such as the rising oil price, turn away from emerging markets, and damaged trade relations between the United States and other countries.
Ramaphosa said the stimulus package centres around re-prioritising R50-billion in government spending, which will see shifts in the current budget, without government having to borrow funds.
Funds will be directed towards agriculture and township and rural economies. Government will introduce a support package for black commercial farmers to facilitate their entry into food value chains. Ramaphosa said finance would be mobilised from the Land Bank, Industrial Corporation and commercial banks.
The package will focus on labour-intensive, export-oriented crops to exploit potential job creation in the agricultural sector. Agriculture saw a 29.2% drop in the second quarter of 2018 GDP figures.
Commenting on uncertainty over the land debate, Ramaphosa said government will soon finalise 30-year leases for farmers. He has recently appointed a 10-person panel to advise government on land reform.
Funds will also be directed towards revitalising three regional and 26 township industrial parks and establishing a township and rural entrepreneurship fund.
The President also highlighted challenges in the health and education sectors. Ramaphosa said government would prioritise 1,100 sanitation projects at schools and funds will be made available for hospitals to immediately buy beds and linen. Health Minister Aaron Motsoaledi has been directed to immediately fill 2,200 critical medical posts.
Finance Minister Nhlanhla Nene said the funds would be diverted from non-performing projects, but he did not specify which departments or projects would see their budgets decreased. He said further information would soon be made available.
The President announced an infrastructure fund will be established that will “fundamentally transform our approach to the roll-out, building and implementation of infrastructure projects”, create jobs on a large scale and help boost investment and future economic growth.
Infrastructure spending has declined in recent years, but Ramaphosa said the fund would co-ordinate government’s various projects to ensure they are effective and efficient. He said “shovel-ready” projects would be prioritised, such as roads, housing, water infrastructure, schools and public transport.
The money will come from a “blended fund”, said Ramaphosa. Government will contribute over R400-billion in the medium-term and will look to equity, quasi-equity, debt and bonds to raise more money. Ramaphosa said the country would not go to institutions like the International Monetary Fund for assistance.
The stimulus package also includes a number of policy changes aimed at providing a direct boost in confidence and boost economic activity.
The country’s visa regime, which has been criticised as too restrictive, will be reformed in the next few months to boost tourism and encourage business visits to South Africa.
Ramaphosa announced that Cabinet has approved the revised version of the third Mining Charter, after former Mineral Resources minister Mosebenzi Zwane’s version was widely criticised by companies and communities. Parliament will be advised to withdraw the Mineral and Petroleum Resources Development Act Amendment Bill, which has long created uncertainty in the sector.
Another announcement likely to boost confidence was that government will initiate the process for the allocation of high-demand radio spectrum in the next few weeks. The move is expected to boost the telecommunications sector and help reduce data costs.
“This is going to be implemented as soon as we walk out of this room,” said Ramaphosa on the broad stimulus package. He said it’s performance would be measured by economic indicators such as GDP and employment levels while government and external agencies measure its effectiveness.
“As South Africans, we have confronted challenges far greater than this before. By working together, we managed to end a seemingly intractable conflict and set our country on the path to a peaceful transition to democracy,” said Ramaphosa, emphasising the need to work with various stakeholders.
The President’s intervention follows the ANC’s call to implement wide-ranging stimulus measures. Business and consumer confidence saw a boost after Ramaphosa’s election but they quickly declined as the reality of the country’s economic challenges set in.
His jobs and investment summits will soon sit to hear further recommendations on boosting GDP and reducing unemployment.
Ramaphosa has been slow to make decisive interventions in the economy and the success of his stimulus package could determine the ANC’s fortunes in the 2019 elections. DM