EXCLUSIVE: Cyril Ramaphosa writes for us on his plan to save SA
The global trade system is in peril, with emerging markets such as ours caught up in a damaging trade spat between the world’s leading economies
The stimulus and recovery plan the government announced last week marks a step change in efforts to revitalise the economy. It responds to the realities we face in the short term, while also laying the foundation for sustainable inclusive growth in the medium to long term. It provides for the government, in partnership with the private sector, to focus on a set of priority areas and pursue these more effectively.
The plan is also in line with our fiscal framework. It underlines our commitment to growth and development as a stable and predictable emerging market.
Over the past six months business and consumer confidence rose to levels that have not been experienced over the past decade. At the same time there has been a reckoning with the effects of prolonged low growth and institutional erosion. In each of the first two quarters of 2018 the economy contracted. The global trade system is in peril, with emerging markets such as ours caught up in a damaging trade spat between the world’s leading economies.
Our plan to reverse economic stagnation involves determined effort to improve the climate for economic activity and create conditions for much higher levels of investment and growth. Our response to current economic conditions is conditioned by the fact that we are not merely responding to a temporary departure from full employment, as was the case with economies such as the US after the Great Recession.
As we attack this economic slump we also need to work towards fixing the underpinnings of how our economy functions. This entails disrupting the cycle of exclusion that locks some people out of the economy.
The resources at our disposal are not unlimited. A decade of countercyclical fiscal policy to respond to the effects of the global financial crisis has exhausted the fiscal space for significant government expenditure. At the same time, we acknowledge that to kick-start growth depends on removing obstacles to greater levels of investment in the economy. Businesses are not struggling with lack of access to cash. It is due to lack of confidence and a dearth of viable investment opportunities that businesses have been reluctant to spend money on fixed capital. These obstacles require policy and regulatory actions that provide clarity and raise efficiency.
We have started effecting significant regulatory reforms in areas such as immigration, telecommunications, mining, and oil and gas, while seeking to reduce the cost of doing business by reviewing certain administered prices. We understand the need to remove the obstacles to economic participation by many of our people who are excluded from the economy. We do not assume that investment and higher levels of growth will automatically lift everyone.
Hence our stimulus and recovery plan makes a conscious effort to reprioritise government resources to activities that are labour intensive and that benefit women, youth and small business. This plan is aimed not just at stimulating growth but stimulating inclusive growth.
Within our budget constraints the government will take every opportunity to reprioritise spending towards programmes and initiatives that yield high impact. An intense focus on health, education and municipal infrastructure is not just a way to boost demand but is also aimed at improving the conditions under which communities live and laying the base for the development of human capabilities.
The multiplier effects from investment in infrastructure are undeniable. There are important lessons to be drawn from past successes, such as in the construction boom ahead of the Fifa World Cup.
We have decided to direct more resources towards agriculture, which has great untapped potential to draw the unemployed into economic activity and provide the "raw materials" to expand the agroprocessing sector of the economy. There is an emphasis on support for black commercial farmers in the form of infrastructure, implements and pesticides. It will assist emerging farmers to participate in key value chains such as grain, red meat, poultry and sugar through access to key infrastructure like abattoirs and feed lots.
The majority of SA’s poor live in township and rural areas, which remain on the periphery of economic activity as a result of the legacy of apartheid spatial planning. Integration, connecting people and jobs, and increasing economic density is at the heart of the government’s programme for economic transformation. We have therefore prioritised the revitalisation of state-owned industrial parks to serve as catalysts for broader economic and industrial development in townships and rural areas. We will establish a township and rural entrepreneurship fund, which will provide finance to aspiring entrepreneurs. This will complement other small business finance and support programmes, including the SME Fund established through the CEOs Initiative to promote the creation and growth of black entrepreneurs and businesses.
The multiplier effects from investment in infrastructure are undeniable. There are important lessons to be drawn from past successes, such as in the construction boom ahead of the Fifa World Cup. This demonstrates what is achievable when the government provides the impetus and policy framework for major initiatives, and private sector resources and expertise are crowded in to deliver important national projects.
It is for this reason that we are setting up an infrastructure fund, which will bring together the government, development financing institutions, life asset management entities and banks to harness existing credit facilities, technical know-how and oversight to ramp up our investment programmes in water, transport, energy, telecoms and social infrastructure. Oversight will be enhanced by a team in the presidency.
As part of the stimulus and recovery plan the government will provide a clear and certain policy framework, with transparent rules and innovative instruments, to drive infrastructure development. This approach strives for coherence in our infrastructure spending and seeks to present a sound value proposition to the private sector to invest in projects of significance.
It also provides an opportunity to embed a new way of doing things and to confront head-on our challenges with execution, especially of large-scale projects.
It is tempting to unleash novel policy directions, but it is far more important to build a track record of successful implementation. We remain guided by the National Development Plan as SA’s overarching long-term map. The National Planning Commission will issue a paper on the economy in the coming weeks, reflecting lessons learned and its recommendations for focal action points in the medium term.
The SA investment conference that will be held on October 26 will demonstrate the tangible steps towards structural transformation. We will reflect on the measures we have taken to restore governance at key economic institutions, to shore up the rule of law and to provide policy direction and clarity.
As an emerging market engaged both in the economic management of business cycles and the reversal of an odious legacy, the stimulus and economic recovery plan rallies the government, business, labour and civil society to focus on high-impact priorities. It is about doing the right things, effectively, in the spirit of real partnership.
• Ramaphosa is president of SA.