There is no real economic recovery plan for South Africa – Report

Analysts have described the ANC’s economic reconstruction and recovery plan as “terrible, archaic, and disturbing”, the City Press reported.

Centre for Economic Development and Transformation founding director Duma Gqubule went one step further, saying the government has no economic recovery plan.

South Africa’s economy is currently in the doldrums after suffering a big contraction during April, May, and June due to the lockdown restrictions imposed in response to COVID-19.

Gross domestic product (GDP) fell by just over 16% between the first and second quarters of 2020, giving an annualised growth rate of ‑51%.

Statistics South Africa added that the country shed 2.2 million jobs during the second quarter, with unemployment reaching concerning levels.

To turn this situation around, the country is relying on the government’s economic recovery plan, which President Cyril Ramaphosa has often mentioned over the past few months.

In April, he punted a three-phase economic response, which would include an economic strategy “to drive the recovery of our economy as the country emerges from this pandemic”.

In June, he said the government is looking at policies that facilitate economic recovery, such as introducing stimulus packages that boost government’s infrastructure spending.

Other plans included creating financing instruments that provide liquidity and bridge financing or debt restructuring instruments.

In August, President Ramaphosa said they will prioritise proposals for infrastructure sectors that are important for economic recovery and resilience, including energy, transportation, health care, and digital infrastructure.

“We are now working together on an urgent economic recovery programme that places the protection and creation of employment at its centre,” he said.

On Sunday 4 October, Ramaphosa again mentioned the economic recovery plan which he said will be unveiled in the very near future.

This plan, he said, will provide greater insight into how the government plans to revive the economy.

“The emphasis will be on infrastructure as a flywheel for economic recovery, with an additional focus on job creation,” Ramaphosa said.

“Ultimately the recovery plan is anchored in social compacting.”

There is no real economic recovery plan

While President Ramaphosa and the government are promoting a comprehensive economic recovery plan, the City Press has put this in doubt.

It reported that analysts described the ANC’s economic reconstruction and recovery plan presented to Cabinet as “terrible, archaic, and disturbing”.

Analysts said the plan lacked a coherent economic programme which will lead to economic recovery and is merely a “list of items with no strategic thinking”.

Gqubule, in turn, said the plan looks like it was written by an intern. “At least 95% of the items mentioned in the economic recovery plan have not been costed,” he said.

He added that this plan is no different from previous wish lists which this government has provided over the last decade or two.

This view is shared by Sasfin Securities deputy chairman David Shapiro, who said South Africa does not need another economic recovery plan.

He said the country has had many economic recovery plans in the past. Instead of another plan, he said the country needs the proper implementation of an economic recovery plan.

The Daily Maverick’s analysis of the plan, done by Ed Stoddard and Tim Cohen, echoes the views of Gqubule and Shapiro.

“Much of the wish list includes goals that the ANC-led government has long aspired to but never achieved,” they said.

“Economic capacity has already been lost, consumer and business confidence have already been shredded, unemployment is rife, and the poor are more vulnerable than ever.”

“This is largely because of non-implementation of previous plans, among other things.”

South Africa faces economic collapse

Eunomix Business and Economics recently warned that South Africa faces a precipitous economic and political collapse by 2030 unless it changes its economic model and implements growth-friendly policies.

The Johannesburg-based political and economic risk consultancy forecasted the country will rank near the bottom of a table of more than 180 countries in terms of security, similar to Nigeria and Ukraine, and have prosperity akin to Bangladesh or Ivory Coast.

That is a significant decline from its current position, though it should fare better on governance and welfare measures.

“Bar a meaningful change of trajectory, South Africa will be a failed state by 2030,” Eunomix said in a report.

While less than a quarter of the population is in work, South Africa’s wage bill as a percentage of its gross domestic product significantly exceeds that of countries such as India, Thailand, and the Philippines.

Eunomix’s recommendation for South Africa’s government is to adopt a “dual-track” strategy of developing and maintaining high levels of social support and paying for it by adopting an aggressive special economic zone policy, which boosts growth and employment, albeit at lower wages.

The South African Economic Reconstruction and Recovery Plan

The draft Economic Reconstruction and Recovery Plan is embedded below.

The South African Economic … by DocumentsZA

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There is no real economic recovery plan for South Africa – Report