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This week, government unveiled its stimulus and recovery plan for the South African economy. We are confident that this announcement represents a decisive moment as we work to reverse the low growth and stagnation that have haunted our economy in recent years. We believe that our plan will begin to restore much-needed hope and confidence for all our people, particularly those most in need.
Our plan has five key areas of focus. Firstly, we will implement growth-enhancing reforms for key sectors, including mining, telecommunications, tourism and transport; secondly, we will reprioritise R50 billion of public finances to support job creation initiatives in township and rural economies, and to improve conditions in our public schools and hospitals; thirdly, we will establish an infrastructure fund and strengthen our technical capacity for the execution of infrastructure projects on time and on budget; fourthly, we will address urgent and pressing matters in education and health; and fifthly, we will invest in municipal social infrastructure improvement.
Our new infrastructure fund will mobilise resources from a range of sources, including developmental finance institutions, multilateral development banks, and private lenders and investors. These new resources will be used in tandem with the significant amount of public funds, amounting to more than R400 billion, which have already been earmarked for infrastructure in our medium-term expenditure plans.
We recognise that agriculture has massive potential for job creation. Government will finalise the signing of 30-year leases to enable farmers to mobilise funding for agricultural development and we will put in place support measures for black commercial farmers. Finance will be mobilised from the Land and Development Bank of SA, the Industrial Development Corporation and commercial banks. As part of our work to promote agricultural production and ensure accelerated land redistribution, an advisory panel on land reform has been appointed that will guide the interministerial committee on land reform chaired by Deputy President David Mabuza.
Sector specific reforms aimed at creating growth in key sectors include immediate changes to South Africa’s visa regime to make travel easier for tourists and skilled professionals. The Mining Charter will be finalised to revitalise investment and exploration in our vitally important mining industry. There will be a review of various administered prices, including port and rail fees, and the process of allocating radio spectrum will be initiated to increase competition in the telecommunications sector, promote investment and reduce data costs.
The new national minimum wage regime will address income inequality by increasing the incomes of millions of low-paid workers. There are about 6.6 million workers who earn far below R20 an hour, and they would benefit immensely from the introduction of a national minimum wage. In addition to bringing relief to these workers and their families, the minimum wage will add an important consumption stimulus to our economy at this crucial time. Similarly, we plan to expand the basket of goods that are VAT zero-rated to protect poor families from the effects of the 1% VAT increase that was implemented earlier this year.
Given the country’s weak fiscal position, and to avoid rising national debt, we will implement our stimulus and recovery plan within the bounds of our existing fiscal envelope. Public resources will be mobilised through the reprioritisation of government spending, and by eliminating waste and corruption.
It is envisaged that our plans will stimulate increased investment by domestic and global investors, whose growing confidence and belief in South Africa’s economic future will help to unleash significant multipliers in the economy. If sound macroeconomic management, combined with rational economic policy reforms by government, has the effect of lowering the cost of doing business and bringing down South Africa’s long-term interest rates, this will assist significantly in stimulating increased levels of investment and job creation in our economy.
In addition to ongoing, short-run measures to stimulate confidence and aggregate demand, longer-run supply-side interventions will be required to ensure the structural change needed for South Africa to become a more inclusive and equal society, and one that is capable of competing effectively in the global economy. In this regard, three interventions are key.
Firstly, basic and higher education outcomes must be radically improved, supported by policies and structures that significantly improve prospects for early childhood development. Our young people need the right kinds of skills to compete in a rapidly changing global economy, which is undergoing what has been characterised as a fourth industrial revolution.
Secondly, as per our latest integrated resource plan, South Africa must transition over the next few decades to a new low-cost, low-carbon energy mix based largely on our world-class wind and solar resources, but also with coal, gas and hydro components. The high cost of electricity has become a major obstacle to investment and job creation. It is now imperative that we restore our low-cost, competitive advantage in power generation. This will enable us to attract investment in a wide range of activities, including energy-intensive activities such as mineral extraction and mineral beneficiation.
Thirdly, to achieve greater equality, we must accelerate land reform so that more South Africans can enjoy the benefits of private land ownership both in the cities and rural areas. As has been previously stated, land reform should proceed in an orderly manner, and should not compromise food security or other sectors of the economy. To assist with job creation, accelerated land reform should include support measures to promote increased small business activity and increased agricultural production activities linked to new land holdings.
South Africa requires an ongoing collective commitment from its social partners to get the economy working in an inclusive manner.
This is why the upcoming Job Summit and Investment Conference have a vital role to play in forging greater consensus about how best to accelerate growth and development in South Africa.
We need to encourage our trade unions to be forward-looking and progressive, concerning themselves as much with the needs of their members as with the needs of the unemployed and community members. For the sake of stability and effectiveness, worker unity and cooperation among various trade union organisations need to be prioritised. Similarly, to promote equity and labour peace, trade unions and employer representatives should seek to reduce wage gaps and strive for longer-term inflation-linked agreements on wages and benefits.
Our business leaders need to show belief in the future of South Africa and agree to work with government in rolling out infrastructure investment and mobilising resources to expand South Africa’s economic base. Business representatives should support measures to increase levels of competition in the South African economy. Mechanisms to promote black economic empowerment, youth employment, employment equity, and the expansion of skills and training should also be high priority matters.
In general, levels of service delivery must be improved across the board at national, provincial and local government levels. Corruption has seriously damaged the capabilities and standing in society of government and state-owned enterprises.
As we work together to implement our stimulus and recovery plans, we must be sure to steer clear of two unhelpful tendencies. Firstly, it cannot be business as usual – corruption has to end, government has to improve its levels of service delivery and cooperation between our social partners must intensify. Secondly and similarly, we must not fall prey to the lure of populism. Knee-jerk and ill-conceived policies will not help us, instead they will lead to a further deterioration of our economy and deepen the misery and distress of the most vulnerable among us.
TALK TO US
Do you think the president and government’s plans will be enough to bring SA back into an age of prosperity? SMS us on 35697 using the keyword CYRIL and tell us what you think. Please include your name and province. SMSes cost R1.50. By participating, you agree to receive occasional marketing material.
