Business outlines accelerated economic recovery plan
If the government takes the right actions now, SA is ‘capable of delivering economic growth of 5% per year, doubling GDP over the next 10 years’, says Business for SA
Business for SA has published detailed proposals for an “accelerated economic recovery”, which it says cannot be funded by the government alone and will require private-sector involvement in building economic infrastructure.
The plan comes as the ANC also prepares to release a growth strategy document later on Friday, also emphasising an infrastructure-led economic recovery.
The Business for SA plan is a product of weeks of intensive work, and zones in on 12 immediate actions to restore growth. Many of those are infrastructure projects, which would lower the cost of doing business and increase SA’s attractiveness as an investment destination. It also calls for a rethink or clarification of a substantial list of policies that have caused uncertainty, from expropriation of land to BEE.
Covid-19 has made it clear that SA has reached a fork in the road, it says.
If the government takes the right actions now, SA is “capable of delivering economic growth in the order of 5% per year, doubling GDP over the next 10 years and materially reducing unemployment, poverty and inequality in the process,” the group said in a statement.
But, this will require “committing to unavoidable, though difficult, decisions in the interests of the nation,” it says.
Continuing on the same path will see an extended period of flat or negative growth, leading to rising government indebtedness and unemployment.
The 12 actions include the following: securing an affordable electricity supply, which includes fixing Eskom; the acceleration of renewable energy from private producers; rail and port expansion, including the introduction of private rail concessions; and taking steps to ensure the full use of SA’s broadband capacity.
Many of these items have been on the government’s agenda of “structural reform” for many years without demonstrable progress. The Treasury, the SA Reserve Bank and international finance institutions have repeatedly said that it is only through such reform that SA’s can escape its low-growth trap.
The group estimates that the recovery will require huge funding, to the tune of R3.4-trillion, over the next three years. This includes R2.4-trillion of public-sector budget deficits. Funding on this scale “cannot be met by domestic sources, nor is it possible for the SA Reserve Bank to address the shortfall in a responsible and sustainable manner through monetary policy measures.”
A more sustainable approach to funding the recovery would be to facilitate the involvement of the private sector in economic infrastructure.
“The private sector can fund, develop and operate economic infrastructure in a competitive regulated environment to reduce the strain on the fiscus and state-owned companies without increasing the cost to the consumer,” suggests the document.
This would enable the government to reduce the budget deficit faster and bring it down to acceptable levels within the next five years.
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