Mixed bag of reactions to Cyril Ramaphosa's stimulus plan

President Cyril Ramaphosa’s economic stimulus and recovery plan is likely to have a “modest effect” on economic growth, but is likely to be compromised by “reckless” economic policy, the DA says.

On Friday morning, Ramaphosa announced that the government will reprioritise 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, particularly the release of spectrum to create competition and drive down the cost of data.

The 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 to save the economy from recession”.

Maynier said the impact on economic growth and job creation is, however, likely to be modest given that the R50bn adjustment amounts to a marginal increase in spending of about 6% on infrastructure over the medium term, and that it was not "new money" but part of the existing budget. He pointed out that the R400bn to be allocated to the 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.

“In the end, the 'stimulus and recovery plan' is likely to have a modest effect on economic growth and job creation, and it is likely to be compromised by reckless economic policy proposals being considered, such as the formation of state banks, land expropriation without compensation, and the nationalisation of the Reserve Bank in SA,” Maynier said.

EFF: 'old neo-liberal economic plans'

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 party said the package has nothing to do with the overall structural changes in the economy, and that Ramaphosa’s promise of radical economic transformation, which the ANC champions, will be “compromised at the table of cosmetic changes to an economy whose essence is the marginalisation of the black majority from the country’s wealth”.

The party said the plan was “thin on detail” and continues to place misguided trust in private-sector investors to take the lead in resolving economic challenges. 

The CEO Initiative, however, said it supports the measures outlined by the president. Jabu Mabuza, co-convenor of the initiative said the stimulus and recovery plan demonstrated the political will to make the necessary, tangible reforms that SA’s economy needs to perform at its optimal level and deliver change in the lives of the most vulnerable in its society.

“We are particularly encouraged by the undertaking from the president and finance minister that this stimulus will be implemented by re-allocating existing resources, as well as embracing other forms of financing through partnerships, rather than adding to the sovereign debt level,” Mabuza said.

He said the CEO Initiative has had various consultations with the government and labour over the past two years in which it has identified numerous areas of structural reform the government can enact to enable greater investment and economic activity.

“In this regard, we are pleased with the announcements outlining amendments to our visa regime; the clarity and certainty provided to the mining sector; the unlocking of value in the telecommunications sector; as well as the intention to reduce the cost of doing business in SA. While many challenges remain, these measures will go a long way towards making our economy more competitive compared to our emerging-market peers,” Mabuza said.

Constructive and positive

Standard Bank economist Elna Moolman said the content of Ramaphosa’s plan is constructive and contains many necessary elements.

“Financial markets, aptly, reacted marginally positively, with the rand and local bonds outperforming peers today,” Moolman said. She said that from a fiscal and sovereign credit-rating perspective, it is critical that Ramaphosa repeatedly emphasises that fiscal spending will be “reprioritised” 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 reprioritised spending is 'advanced' and he reiterated afterwards that it will 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 (or outlook) downgrade by Moody’s in October,” Moolman said.

Elize Kruger, senior economist from NKC African Economics said the first impression of the stimulus package is “positive”. She said that Ramaphosa “clearly acknowledged the limited fiscal space”, and that she is hopeful that, with finance minister Nene leading the process, it will be pulled off successfully.

Kruger remains confident about NKC's slightly above consensus view of economic growth of 2.1% and 2.5% in 2019 and 2020, respectively, compared to 0.7% in 2018. “So, overall, I am optimistic that this plan can boost much-needed confidence among, particularly, the business sector of SA, igniting investment spending." 

With Asha Speckman