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Ramaphosa’s new plan for the economy

President Cyril Ramaphosa has announced a raft of measures aimed at improving the South African economy.

Ramaphosa says the plan has four broad parts.

The stimulus and recovery plan has four broad parts:

  1. Firstly, implementation of growth enhancing economic reforms.
  2. Secondly, reprioritisation of public spending to support job creation.
  3. Thirdly, the establishment of an Infrastructure Fund.
  4. Fourthly, addressing urgent and pressing matters in education and health.
  5. Fifthly, investing in municipal social infrastructure improvement.

It is not entirely reassuring when someone says the plan has four parts, and then lists five. Zuma was the one who was supposed to have issues with numbers.

Economic Reforms

  • Cabinet will relax regulations regarding the travel of minors, review the list of countries requiring Visas to enter South Africa, pilot an e-Visa’s scheme, and revise Visa requirements for highly skilled foreigners.
  • The revised mining charter has been approved in order to give investors some certainty as to exactly what is going on in that sector.
  • Parliament has been asked to kill the Mineral and Petroleum Resources Development Act Amendment Bill. The oil and gas industry will get separate legislation.
  • Government is reviewing various administered prices – including electricity, port and rail tariffs.
  • Government is going to roll out allocations for high demand radio spectrum to enable licensing.
  • Government will increase the amount it buys from small businesses and cooperatives.
  • Poultry and other sensitive sectors will be getting some protection.
  • There will be a crackdown on illegal imports.
  • IDC will aim to increase proposals by 20% over the next year to R20 billion.
  • The Employment Tax Incentive will be extended for another 10 years, with a review after five.
  • Public employment programs will receive greater support.
  • As will the clothing and textile sector.
  • Funds from the Unemployment Insurance Fund will be used to support ‘labour activation programs’.

Agriculture, rural areas and townships prioritised

  • Funding will be reprioritised towards investment in agriculture, rural areas and economic activity in townships.
  • Black farmers will get support measures such as improved infrastructure to help them get into food value chains.
  • Access to finance from the Land Bank, Industrial Development Corporation and commercial banks.
  • Highly labour intensive export crops will get a significant portion of this funding.
  • Government will sign 30-year-leases to help farmers get funding for agricultural development.
  • A 10 person advisory panel has been formed to guide the Inter-Ministerial Committee (IMC) on Land Reform chaired by Deputy President David Mabuza.
  • 3 regional and 26 township industrial parks will be revitalised.
  • A township and rural entrepreneurship fund is being established. This will target manufacturing, mining, industrial infrastructure and sectors in distress.

Fixing our public services

  • Public schools will get more funding to fix their sanitation issues.
  • Funding has been made available to our health department to buy beds and linen, as well as fill 2,200 critical medical posts.

Infrastructure

  • A South Africa Infrastructure Fund is being set up based on the lessons from the 2010 World Cup.
  • The fiscus will contribute over R400 billion towards this fund in the medium-term.
  • A Infrastructure Execution Team is being set up to make sure the money is spent in the right places, and the projects actually get finished.
  • The PICC’s role is getting boosted.
  • More funds will be allocated towards provincial and national roads, settlements, water infrastructure, schools, student accommodation and public transport.
  • 67 pilot municipalities have been identified for infrastructure spending in the short term.

My Take

It is difficult to get a fix on what the real cost of this will be because a lot of it is more about reallocating spending rather than increasing it.

The infrastructure spending sounds good. I just got back from a holiday in South Africa’s holey land Mpumalanga. That isn’t a typo, the roads aren’t in the best of condition.

In principle increasing funds to actually support black farmers is also good. I’m not too keen on David Mabuza’s role there given what the New York Times has to say about him, but we’ll see.

I don’t think fixing our schools’ sanitation or filling vacancies in our hospitals counts as stimulus. This is stuff that should have been being done anyway – and to announce it as some sort of reform is a bit like saying, “We’ll start actually doing our jobs” and expecting praise for that.

The shift on Visa requirements is a good one. Malusi Gigaba’s decision to require full form birth certificates for people bringing their kids on holiday with them to South Africa, was incredibly stupid at the time.

According to Fin24, we don’t know what’s in the revised mining charter but hey it is approved so that means… something?

Revising the cost of electricity could be a good idea. Aside from the practical issues regarding the costs of production, all the revelations around state capture and how the Gupta family benefited from contracts with Eskom make the price hikes we’ve suffered over the past few years sting just that little bit more.

#Datamustfall, so rolling out that high demand spectrum is also pretty good.

Government buying more from small producers is only good if government actually starts paying them. Smaller businesses aren’t helped by customers who don’t pay their bills.

I don’t know how much protection can be offered to our poultry industry. Barrack Obama threatened our Agoa status over chicken imports when he was president, I don’t think Donald Trump is going to look any kinder on that.

Overall, there is some good stuff here, a lot of it reads like fixing what the ANC broke under Zuma and I’m not entirely sure all of it is possible, but its at least something.

We don’t know how much it will cost yet, more details will come with the medium term budget, but so far it doesn’t look awful at least.

  • Picture courtesy of DIRCO via Flickr.

 

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