Cape Town - Economists and political analysts are worried that any good from the government’s historic R500 billion economic recovery stimulus package will be expensive for the taxpayer and could be derailed by corruption.
“We must remember that our state machinery is characterised by corruption and inefficiency,” Chief Economist at Efficient Group Dawie Roodt said.
The measures that were announced would inevitably mean more state interventions and more power to politicians and bureaucrats; power that was unlikely to be rescinded, and this would radically reduce the chance that any support package would be successfully implemented, he said.
“This does not bode well.Although the measures towards supporting the needy will go a long way, the dangers are obvious. First, there is no way these increases will be temporary,” said Roodt. “Second, the support for those not covered by other projects may well be the beginning of a basic income grant.”
During his announcement of the R500 billion package, President Cyril Ramaphosa said the allocations were:
- R20billion to fund the health response to Covid-19, including personal protective equipment for health workers, community screening, increased testing capacity, additional beds in field hospitals, ventilators, medicine and staffing.
- R20bn to municipalities to provide emergency water supply, increased sanitisation of public transport and facilities, as well as food and shelter for the homeless.
- R50bn in social relief for the most vulnerable families, temporary six-month Covid-19 grant and special Covid-19 social relief of distress grant.
- R100bn to protect and create jobs.
- R40bn income support payments for workers where employers are unable to pay wages.
- R2bn to assist small, medium and micro enterprises, spaza shop owners and other small businesses.
- R200bn loan guarantee scheme in partnership with major banks, the National Treasury and the SA Reserve Bank to cover companies with operational costs (salaries, rent and payment of suppliers)
- The Reserve Bank unlocked at least R80bn in the real economy by cutting the repo rate by 200 basis points and taking further steps to provide additional liquidity to the financial system.
Political analyst Ralph Mathekga said: “The stimulus package showed sensitivity to issues on the ground such as food inequality and other issues that have been accentuated during this lockdown.
“The question is how will we afford it and how will we make sure that the money doesn’t follow the usual road of corruption and disappear? You and I will have to work to pay for it all. Also, when does it end? Any loan comes with conditions, and the most universal one is that it must be repaid. I fear it will be the middle classes who will pay through taxes.”
Corruption Watch executive director David Lewis said: “While there has been great openness and transparency in providing updates on current statistics and healthcare measures in place, there has been less in the matter of distribution of aid and food to those most in need. The manner in which these programmes are implemented, including the Solidarity Fund, and in which distribution of food and resources is handled, seems to point to growing evidence of corruption and mismanagement.”
Taking a more positive view however, FNB senior economist Siphamandla Mkhwanazi said: “We view the R500bn stimulus package in a positive light. It will certainly go a long way in cushioning the economy against the devastating impact of Covid-19, as well as mitigate the impact of some pre-existing economic ailments during this time. It was also slightly bigger than we initially anticipated. Nevertheless, its effectiveness will depend on implementation.”
Looking ahead, Mkhwanazi said: “We also keenly await details of economic restructuring measures mooted in the president’s speech. This will give us a sense of whether our economy will rebound post the crisis. If this happens, our revenues could actually improve in the medium to longer term, which will assist with debt repayments.”
Co-chief investment officer at Anchor Wealth and Asset Management Nolan Wapenaar said: “At Anchor we are net positive on both the package and the political messaging in the president's address. We highlight that the president did not announce prescribed assets or any other move that will increase money supply in South Africa. Therefore, in our view, the key populist risks have been averted.”
UWC Department of Political Studies post-doctoral fellow Dr Shingai Mutizwa-Mangiza said: “Politically the president has been very good at keeping even those who might have opposed him on side with his collegial, inclusive manner of handling this crisis and this has made his position stronger within the party. The fact that he can talk about borrowing from the IMF, despite there being a strong history of resistance to the attached reforms and conditionalities such a loan would bring, shows there has been a closing of ranks behind the president during this crisis.”
@MwangiGithahu
Cape Argus
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