How Ramaphosa plans to rescue South Africa from economic misery

By Xolisa Phillip, in Johannesburg
Posted on Friday, 16 October 2020 15:41, updated on Tuesday, 20 October 2020 16:22

A worker of the hospitality industry carries a mock coffin outside a closed bar during a protest against the coronavirus disease (COVID-19) lockdown regulations and job losses in Cape Town, South Africa, August 6, 2020. REUTERS/Mike Hutchings

Devastated by the ravages of the COVID-19 crisis, which has left more than two million South Africans without jobs and the economy in tatters, President Cyril Ramaphosa has unveiled a recovery plan. 

The World Bank predicts that: “In Africa, COVID-19 could push up to 40 million people into extreme poverty, erasing at least five years of progress in fighting poverty.” How many of those will be in South Africa?

“The pandemic has caused great hardship and suffering,” Ramaphosa conceded during an address to a joint sitting of parliament’s two houses on Thursday 15 October.

In the seven months since Ramaphosa’s government declared a national state of disaster to curb the rapid spread of the coronavirus, the country’s economy has contracted significantly.

The expanded definition of the official unemployment figures, which includes discouraged jobseekers, stands at nearly 40% of working-age South Africans. This is one of the highest in the world.

World Bank chief economist Albert Zeufack is urging governments in the region to rethink growth, and prioritise job creation as an essential component of any economic recovery.

READ MORE South Africa: Banks consider more relief for borrowers hurt by COVID

He points to the fact that Africa’s prolonged economic growth earlier this century did not coincide with the expected levels of job creation. This is a riddle that governments on the continent have to solve for to effect a sustainable recovery.

Job creation, or employment stimulus, is indeed among the list of measures announced by Ramaphosa.

The other components of economic recovery are infrastructure, energy and industrial growth.

Balance the books

But delivery is far from easy.

The current economic climate has placed strain on public finances. The country’s treasury expects a sizeable shortfall in revenue collection.

READ MORE Clock ticking for South African Airways as funding fails to arrive

In addition, “a critical pillar of this plan is the fiscal framework that will be outlined by … [finance minister Tito Mboweni] in the medium-term budget policy statement (MTBPS). This framework will provide a path of fiscal consolidation, debt reduction and reprioritisation that is supportive of growth and recovery,” said the President.

Mboweni has submitted a request to the speaker of parliament to table the MTBPS on Wednesday 28 October.

COVID-19 considerations

Although most countries on the continent have weathered the COVID-19 storm, South Africa has been the exception, notes the World Bank.

Current government figures show that:

  • More than 18,000 people have died from COVID-19.
  • South Africa has more than 700,000 confirmed cases. Some 90% of those infected have recovered.

“The World Health Organisation advised us South Africa is now entering a phase that requires high vigilance and heightened readiness to respond,” cautioned Ramaphosa.

Road to recovery

Despite this, economic recovery remains a priority.

On infrastructure, “by the end of June 2020, we had 276 catalytic projects with an investment value of R2.3trn ($139.2bn). A list of 50 strategic integrated projects and 12 special projects was gazetted in July 2020,” said Ramaphosa.

Energy interventions focus on fast-tracking implementation of the Integrated Resource Plan – South Africa’s energy blueprint.

Should all go according to plan, the country will have 11,800MW of new generation capacity by 2022 – most of it from renewable sources.

“In the immediate term, agreements will be finalised with independent power producers to connect over 2,000MW of additional capacity from existing projects by June 2021,” according to Ramaphosa.

COVID-19 lockdowns have cut electricity demand but troubled parastatal Eskom still had to implement blackouts in March, July and September due to maintenance and other problems.

The industrial aspect hinges on ramping up efforts for localisation to boost domestic manufacturing capacity.

Furthermore, the government aims to introduce an e-visa system and plans to extend visa waivers to new tourism markets. South Africa has entered what would normally be peak tourism season. These efforts are intended to give the sector a lift.

READ MORE South Africa’s level 1 will kick-start tourism recovery – Tsogo Sun CEO

In addition, “we will shortly be publishing an expanded list of countries from where resumption of international travel will be permitted,” Ramaphosa said.

Scourge of crime and corruption

But what would an economic recovery be without addressing crime and corruption? Ramaphosa acknowledged that “decisive action against crime and corruption is essential to inclusive growth.”

Ramaphosa campaigned on eliminating the corruption that took hold under former president Jacob Zuma, but prosecutions and reforms have been slow to take off.

At the South African Revenue Service, “we are working to clamp down on the illegal economy and illicit financial flows, including transfer-pricing abuse, profit shifting, VAT [value-added tax] and customs duty fraud, under-invoicing of manufactured imports, corruption and other illegal schemes,” warned Ramaphosa.

The Special Investigating Unit is looking into allegations of criminal conduct in all public entities during the national state of disaster.

Most important, “we will strengthen the framework to ensure political officebearers at all spheres of government do not do business with the state,” said Ramaphosa.

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