Fitch says Cyril Ramaphosa's big plans won't work
Many of the planned measures relate to long-standing policy ideas that have been slow to implement
President Cyril Ramaphosa’s economic stimulus plan is unlikely to give the economy a significant boost, according to credit rating agency Fitch Ratings.
“Several of the measures relate to existing proposals and others will take time to finalise and to have an impact,” the credit rating agency warned in a statement on Tuesday.
The economic stimulus and recovery plan, announced following the shock news that SA had entered a recession for the first time since the global financial crisis, encompasses growth-enhancing reforms; reprioritising public spending to create jobs; setting up an infrastructure fund; improving education and health and investing in municipal social infrastructure.
Fitch said the plan does include measures that could support growth, but many relate to long-standing policy ideas that have been slow to implement. The plan will reprioritise about R50bn of spending within existing ceilings. Details on how this will be done will be made clear in the medium-term budget policy statement at the end of October.
“This could be modestly positive for growth as the measures targeted could have a greater multiplier effect, as could greater public-private infrastructure investment. But it is not clear how the planned infrastructure fund would operate and whether it will increase contingent liabilities to the government,” said Fitch.
Fitch currently expects growth of 0.7% this year, significantly lower than the 1.3% projected by the Treasury.
In June, Fitch affirmed SA's BB+ rating with a stable outlook after a host of meetings with public- and private-sector role-players.
Fitch downgraded SA weeks after the firing of Pravin Gordhan as finance minister in 2017 but spared the country another downgrade in its November review.