EDITORIAL: SA awaits detail of relief plan
Ramaphosa acquitted himself well with the Covid-19 stimulus package, but critical success hinges on how he manages the easing of restrictions
Among the things we’ve learnt this week, perhaps we should add that South Africans love a good speech. The value of having an eloquent and assured leader in times of crises cannot be overestimated.
Considering the rambling leader of the US, we can count ourselves lucky having Cyril Ramaphosa at the helm. If only we could say the same about Ramaphosa’s supporting cast. Perhaps, as he faces other challenges, he might consider speaking directly and more often to the people of SA, as Donald Trump does with his Twitter rants.
A president who is regularly in touch directly with the people and enjoys public support and confidence might feel less constrained by destructive elements in the ANC who are ready to stab him in the back at the very first opportunity. The president’s address on Tuesday followed the trend of previous ones since the coronavirus entered SA, with nothing to fault on presentation or sentiment.
Now for substance, and more importantly, delivery. As a starting point, the extra support for the most vulnerable in society through the grant system wins our full endorsement. That’s not to say there aren’t glaring things to be sceptical about in the overall plan. It’s become common to describe it as a R500bn stimulus package, though the government itself doesn’t use that language. Nevertheless, it’s not about to challenge anyone who says it's giving a boost to the economy equivalent to 10% of GDP.
Eagle-eyed critics will point out that this includes R130bn of existing money, so that’s about a quarter of the “stimulus” taken care of. Before Ramaphosa’s speech, this newspaper reported that the government was considering cuts in water and sanitation projects. If we are going to let failing state-owned enterprises such as SAA go and allocate that money towards health and other key services, we could get away with describing such moves as stimulatory.
While we welcome the move, we would also be cautious to take the proposed R200bn loan guarantee scheme at face value without having seen the final details. There’s no guarantee that this is the amount that will eventually flow into businesses. There are still too many questions left unanswered, such as the proportion of the loans that will be guaranteed by the government.
Commercial banks will presumably not simply discard their usual risk-assessment standards. They might also judge that companies that were solvent before the lockout, well into its fourth week, are no longer so. And for commercial banks, whether 50% or 100% of the loans will be guaranteed by The Treasury will make a difference.
There are other aspects to be concerned about. One of the measures is to channel R20bn through municipalities. From Makhanda in the Eastern Cape to Lekwa municipality in Mpumalanga, the story of local government in SA is one of dysfunction and chaos, with tragic consequences for the citizens they are supposed to be serving.
Ramaphosa’s optimism about the effectiveness of the Unemployment Insurance Fund would seem to be contrary to evidence on the ground, if correspondence received by this paper from frustrated would-be recipients is anything to go by.
The government will also need to provide clarity on the nature of the agreements with the IMF and other multilateral lenders. And where is the money for the rest to come from?
Finance minister Tito Mboweni's planned adjustment budget will be crucial in giving further substance to initiatives announced by Ramaphosa. The Treasury has been perceived to be largely absent during this crisis. Mboweni has a golden opportunity to change that narrative. He will need to answer questions about how the government plans to fund its extra spending, how much he expects to raise on financial markets and how much will come from friendly loans from the likes of the IMF.
As for Ramaphosa, there’s another address to look forward to on Thursday night. We would like to see evidence that in exploring options for a managed relaxation of the lockdown he has been listening to the more reasonable voices in the cabinet, and will have a reasonable set of regulations with a clearly communicated rationale.
The nation’s confidence and consent require it.
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