President Cyril Ramaphosa. Pic: Supplied.
President Cyril Ramaphosa. Pic: Supplied.

Economic recovery plan for SA to focus on jobs and small business

By Ashley Lechman Time of article published Oct 15, 2020

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JOHANNESBURG - President Cyril Ramaphosa presented the South African Economic Reconstruction and Recovery Plan to a Joint Hybrid Sitting of Parliament earlier today.

The plan aimed to expedite, in a sustainable manner, the recovery of South Africa’s economy that was, like most economies, deeply affected by the Covid-19 pandemic.

Ramaphosa said the recovery plan had five main focus points:

  1. Create jobs
  2. Focus on small businesses and strengthen medium and large businesses
  3. Accelerate economic reforms and growth
  4. To fight crime and corruption
  5. Improve the capability of the state

Ramaphosa began his address by speaking about the Covid-19 pandemic that the country and the rest of the world finds itself battling.

"Covid-19 has infected 38 million people around the world, and is responsible for the deaths of more than a million people. The pandemic will not be over soon. This has far-reaching implications for every part of human development. The pandemic continues to cause severe damage to the global economy. No economy has been left unaffected," Ramaphosa said.

"South Africa has over 700 000 confirmed cases of COVID-19. 90 percent of those infected have recovered. The measures we took to prepare health facilities helped ensure we were able to withstand the surge in infections in July," the president said.

Ramaphosa said that more than 2 million people lost their jobs in the second quarter this year.

"Our economy has contracted sharply. Businesses have closed and jobs have been lost."

He went on to say that the recovery plan is meat to transform the economy of South Africa, in an inclusive and transformative manner.

Ramaphosa said that SA's economic relief package of R500 billion was the biggest on the African continent.

"The special Covid-19 grant and top up of existing grants of close to R40 billion has been provided to more than 17 million South Africans. The special Covid-19 grant has reached more than 6 million unemployed people. More than 960 000 companies have benefited from the UIF wage support scheme and grants and loans provided from various government departments."

He went on to reaffirm the steps already taken to protect the economy, including the South African Reserve Bank lowering their rates to the lowest in 50 years.

The presidency said in a statement that the plan was widely deliberated among government and social partners – business, labour and community - under the auspices of the National Economic Development and Labour Council (NEDLAC).

South Africa’s finance minister, Tito Mboweni, extended his Medium-term Budget Policy Statement by a week, to allow the president to announce his plan and take it into account when adjusting his budget.

JOB CREATION

Ramaphosa said that the creation of jobs is at the centre of the reconstruction and recovery plan.

"We have to get people back into jobs and create more employment opportunities. The interventions outlined in this plan will achieve efficient, secure and reliable energy supply in the next two years; create and support over 800 000 work opportunities and unlock more than R1 trillion in infrastructure investment over the next 4 years," the president announced.

Ramaphosa said that large-scale job interventions driven by the state and social partners have proven effective in many countries that have faced devastation from wars and other crises.

“We have committed R100 billion over the next three years to create jobs through public and social employment as the labour market recovers. This starts now, with over 800,000 employment opportunities created in the months ahead.”

“The employment stimulus is focused on those interventions that can be rolled out most quickly and have the greatest impact on economic recovery,” the president said.

“At the heart of the employment stimulus is a new, innovative approach to public employment which harnesses the energies and capabilities of the wider society. It uses the considerable creativity, initiative and institutional resources that exist in our society to respond to local community priorities,” Ramaphosa said.

The president said that these activities will be locally driven, allowing participants to earn an income while contributing to their community.

  • Traditional forms of public employment are being scaled up and new forms of public employment created to meet the immediate need.
  • We are going to expand our natural resource management programmes such as Working on Fire and Working for Water.
  • We are going to create 300,000 opportunities for young people to be engaged as education and school assistants at schools throughout the country, to help teachers with basic and routine work so that more time is spent on teaching and enabling learners to catch up from time lost because of Covid.
  • More than 60,000 jobs will be created for labour-intensive maintenance and construction of municipal infrastructure and rural roads.
  • To support our healthcare system an additional 6,000 community health workers and nursing assistants will be deployed as we proceed with the implementation of National Health Insurance.

Public employment will be expanded at the provincial and city level, contributing to cleaner, greener and safer public spaces and improved maintenance of facilities.

SMALL BUSINESS

Ramaphosa said that there are between 2.4 million and 3.5 million SMMEs in the country, with the largest number in the informal and micro sectors.

“They offer the greatest untapped potential for growth, employment and fundamental economic transformation. Through a focused support programme, we will support SMME participation in the manufacturing value chain. This will include the targeting specific products for manufacture by SMMEs for both the domestic market and for export,” Ramaphosa said.

“It will also include the provision of business infrastructure support, financial assistance through loans and blended funding, facilitating routes to market, and assistance with technical skills, product certification, testing and quality assurance. Economic growth cannot be realised without the inclusion and active participation of women.”

The president said that they will be working with women-empowered companies to progressively reach a target of directing at least 40% of procurement spend to such enterprises.

To aid local businesses further, Ramaphosa said that social partners have agreed to support a massive ‘buy local’ campaign for this festive season, with a particular call to support women-owned enterprises, small businesses and township enterprises.

Ramaphosa urged the rest of the South African republic to help contribute to the economic recovery of the country by choosing to buy local goods and support local businesses.

“This is one way that each and every one of us can contribute to building a new economy. A vital part of growing our industrialisation effort are the sectoral masterplans, which bring all partners together to agree on specific measures to improve productivity, investment and competitiveness.”

Ramaphosa said that there are currently masterplans in the automotive, clothing and textile, poultry and sugar sectors.

“We are now working to finalise masterplans in the digital economy, forestry, agriculture and agro-processing, creative industries, aerospace and defence, renewable energy, steel and metal fabrication and furniture. A central pillar of this work is the transformation of our economy, creating space for new black and women entrants and take deliberate steps to change ownership and production patterns,” the president stated.

Ahead of Ramaphosa’s address to parliament, The South African National Civic Organisation (SANCO) in the North West on Thursday appealed for the Post Covid-19 economic recovery plan to extricate the overwhelming majority of women in rural areas who are afflicted by poverty, unemployment and underdevelopment.

“Rural women must be placed at the centre of every development programme targeting rural communities if poverty, unemployment and underdevelopment are to be addressed,” said SANCO Provincial Chairperson, Paul Sebegoe.

Sebegoe said that women are one of the central pillars of development therefore their needs and rights must be addressed if poor communities are to prosper and grow.

ECONOMIC REFORM

Ramaphosa stated that the country cannot sustain the current levels of debt, as increasing borrowing costs are diverting resources that should be going to economic and social development.

Ramaphosa went on to say, “We are urgently implementing the economic reforms that we have agreed with our social partners at The National Economic Development and Labour Council (NEDLAC) to unlock investment, stimulate economic activity and generate revenue for the fiscus.”

“In reducing government expenditure, we are ensuring that funds are reprioritised towards poverty alleviation, infrastructure investment, support for economic development and fighting crime and corruption.”

The president went on to state that the plan will also introduce the reduction of reliance on State Owned Enterprises (SOEs) on the fiscus.

He said that government will be intensifying efforts to stabilise strategic companies, accelerating the rationalisation of SOEs and, where appropriate, identifying strategic partners.

“It is clear that implementation is going to be the key in giving effect to this recovery and reconstruction plan.”

Cape Town-180822-President Cyril Ramaphosa. Photograph:Phando Jikelo/African News Agency/ANA

CRIME AND CORRUPTION

Ramaphosa stated that decisive action against crime and corruption is essential to inclusive growth.

“Criminal elements in our country have taken to the illegal occupation of construction sites and soliciting protection money from businesses. To combat these practices, a Joint Rapid Response Team at a national and provincial level will respond to the problem of violent disruptions at construction sites and other business activities.”

Ramaphosa said that the turnaround at the South African Revenue Service (SARS) has begun in earnest, and significant areas of tax evasion and tax fraud have already been identified.

The president said that SARS is rebuilding its capacity to reverse the decline, improve compliance and recover lost tax revenue.

“We are working to clamp down on the illegal economy and illicit financial flows, including transfer pricing abuse, profit shifting, VAT and customs duty fraud, under-invoicing of manufactured imports, corruption and other illegal schemes. The decisive action we have taken to prevent, detect and act against Covid-related corruption will strengthen the broader fight against crime.”

Ramaphosa said that the Special Investigating Unit has made significant progress in probing allegations of criminal conduct in all public entities during the national state of disaster.

The president said that the outcomes of the investigations will be made public once all the due process have been completed.

Law enforcement agencies are being strengthened and provided with adequate resources to enable the identification and swift prosecution of corruption and fraud.

“We wish to assure all South African that there will be no political interference with the work of law enforcement agencies. We will strengthen the framework to ensure that political office-bearers at all spheres of government do not do business with the state and we welcome the agreement at NEDLAC that all social partners will act decisively against corruption and fraud in their ranks,” Ramaphosa said.

He went on to state that the Public Procurement Bill will be fast-tracked and transversal contracts put in place for large-volume items.

“We will soon finalise and begin implementation of the new National Anti-Corruption Strategy, which will improve transparency, monitoring and accountability in government and across society. Through these actions, we will ensure that every Rand of public expenditure is spent productively to benefit our people and support our recovery effort.”

CAPABILITY OF THE STATE

Ramaphosa announced Infrastructure SA and the Infrastructure Fund to ensure that there is active implementation of the infrastructure built programme.

“This approach is already encouraging private investors to help us build capability for infrastructure delivery within the state and to develop blended financing models. The Infrastructure Fund will provide R100 billion in catalytic finance over the next decade, leveraging as much as R1 trillion in new investment for strategic infrastructure projects.

Several projects are already in construction.

These include:

  • Human settlements projects such as Matlosana N2 in North West, Lufhereng in Gauteng, Greater Cornubia in KwaZulu-Natal and Vista Park in Free State.
  • Together these represent an investment value of R44.5 billion.
  • In total, we have gazetted 18 housing projects to the value of R130 billion, which together will produce more than 190,000 housing units.
  • Transport projects currently under construction include the N1 Polokwane and N1 Musina with a total value of R1.3 billion.

Within the next six months, Ramaphosa said government will:

  • Embark on the modernisation and refurbishment the commuter rail network, include the Mabopane Line in Tshwane and the Central Line in Cape Town;
  • Expand the national rural and municipal road rehabilitation and maintenance programme using labour intensive methods; and
  • Fast-track the implementation of gazetted strategic infrastructure projects through the approval of credit enhancing instruments, provision of bulk infrastructure, and speedy processing of water use licenses, environmental impact assessments and township establishment; and
  • Adapt the infrastructure procurement framework to enable public-private partnerships and unlock new funding.

Ramaphosa said that the second priority intervention is to rapidly expand energy generation capacity.

“We are accelerating the implementation of the Integrated Resource Plan to provide a substantial increase in the contribution of renewable energy sources, battery storage and gas technology.”

This should bring around 11,800 MW of new generation capacity into the system by 2022. More than half of this energy will be generated from renewable sources, the president said.

In the immediate term, agreements will be finalised with Independent Power Producers to connect over 2,000 MW of additional capacity from existing projects by June 2021.

The Risk Mitigation Power Procurement Programme will unlock a further 2,000 MW of emergency supply within twelve months.

BUSINESS REPORT

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