Cyril Ramaphosa delivers his economic recovery plan
The government will reprioritise about R50bn within its existing budget to reignite economic growth and create jobs, President Cyril Ramaphosa said on Friday.
The stimulus package is seen as critical ahead of the 2019 national elections, as the plan moves him away from the economic objectives of his predecessor, which was tabled in the 2018-19 budget address by former finance minister Malusi Gigaba. The plan is doubly significant for Ramaphosa and the ANC after the shock second-quarter GDP data that showed that SA had entered a technical recession. The party has admitted that entering elections in recession would be damaging to its campaign, particularly in the country’s economic hub Gauteng.
Presenting the government’s much-anticipated grand plan to kick-start SA’s stalling economy, Ramaphosa also announced the establishment of an infrastructure fund that is a core part of the package. He said R400bn will be leveraged from various development finance institutions, pension funds and ordinary investors, among others over the medium term to drive the infrastructure fund.
“We are establishing a dedicated infrastructure team in the presidency that has project management and engineering skills which will identify shovel-ready public sector projects such as roads and dams,” Ramaphosa said during a briefing at the Union Buildings.
“We have limited fiscal space to increase spending or increase borrowing … we do not have fiscal space to pour money in the economy ... we have to resort to re-prioritising our spending and budget within the current fiscal frame work,” the president said.
We have limited fiscal space to increase spending or increase borrowing … we do not have have fiscal space to pour money in the economy ... we have to resort to re-prioritising our spending and budget within the current fiscal frame workPresident Cyril Ramaphosa
The package also 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 telecommunications industry, particularly the release of spectrum to create competition and drive down the cost of data.
“The stimulus package consists of a range of measures, financial and non-financial, to ignite economic activity and restore investor confidence, and prevent further job losses, and create new jobs,” Ramaphosa said.
The measures give priority to those sectors that can revive the economy, including agriculture.
Ramaphosa said more details on how the budget will be reprioritised will be provided when finance minister Nhlanhla Nene presents the medium-term budget policy statement. Nene said most of the funds for the stimulus package would be moved from under-performing departments.
Ramaphosa first proposed the stimulus package in July, in a bid to boost SA’s sluggish economy and tackle the unemployment crisis, which at just more than 27% remains a major headache for the government more than two decades since the official fall of apartheid. However, Ramaphosa’s plan to reignite growth was dealt a heavy blow with the news that SA was in a technical recession.
Where the money would be redirected from was, however, not clear and South Africans would have to wait and see how far Ramaphosa would move from what Gigaba had tabled in February when Nene fleshes out the details.
Unisa political analyst Somadoda Fikeni said as the initial budget was tabled by Gigaba, who was Zuma’s pick for finance minister, the statement made by Ramaphosa was important.
However, he said the key would be how the plan was implemented, as government had shown “very little ability” to implement anything.
“If he could implement one quarter of what is being promised, it would go a long way to boost his standing in the next election,” Fikeni said.
The rand extended gains and government borrowing costs fell following the speech. The rand was at R14.22 against the dollar, its best level in about four weeks, while the yield on the benchmark R186 bond was at 9.03% from 9.08%.
With Andries Mahlangu