President Cyril Ramaphosa presented his plan for the reconstruction and recovery of the economy and country in a joint sitting of parliament and the National Council of Provinces.
He sales the objectives of the plan are clear:
* To create jobs, primarily through aggressive infrastructure investment and mass employment programmes;
* To reindustrialise our economy, focusing on growing small businesses;
* To accelerate economic reforms to unlock investment and growth;
* To fight crime and corruption; and
* To improve the capability of the state.
“The reality that we must confront is that the pandemic will not be over soon,” he says. “This has far-reaching implications in every area of human development, from education to health, from food security to poverty alleviation, from the empowerment of women to social stability.
“The pandemic continues to cause severe damage to the global economy, affecting trade, investment, production, international travel and global supply and demand.”
He adds that South Africa is now entering a phase that requires high vigilance and heightened readiness to respond.
At the same time, we need to rebuild, repair and restore our country.
“Our country had immense challenges for a number of years before coronavirus. The coronavirus pandemic has worsened these challenges.
“Poverty and inequality have deepened, threatening many South Africans with hunger and a sudden loss of income. Our economy, like other economies, has contracted sharply, businesses have closed and jobs have been lost.
“THe economic shock is unprecedented in our country, and it will take an extraordinary effort to recover from it.”
Ramaphosa says we have an opportunity to drive fundamental and lasting change. “It is an opportunity not only to recover the ground that we have lost over the course of the pandemic, but to place the economy on a new path to growth.”
The South African Economic Reconstruction and Recovery Plan builds on the common ground established by the social partners – government, labour, business and community organisations – through intensive and detailed consultations over the last few months.
It is informed by the work of Cabinet’s Economic Cluster working together with government departments and Cabinet itself and draws on the contributions of the leading economists who make up the Presidential Economic Advisory Council.
The creation of jobs is at the centre of the Reconstruction and Recovery Plan. It responds to the immediate economic impact of Covid-19 by driving job creation and expanding support for vulnerable households.
“We aim to do this primarily through a major infrastructure programme and a large-scale employment stimulus, coupled with an intensive localisation drive and industrial expansion.”
The interventions outlined in this plan aim to:
* Achieve sufficient, secure and reliable energy supply within two years;
* Create and support over 800 000 work opportunities in the immediate term to respond to job losses;
* Unlock more than R1-trillion in infrastructure investment over the next four years;
* Reduce data costs for every South African and expand broadband access to low-income households;
* Reverse the decline of the local manufacturing sector and promote reindustrialisation through deeper levels of localisation and exports; and
* Resuscitate vulnerable sectors such as tourism, which have been hard hit by the pandemic.
According to the modelling done by National Treasury, the implementation of this plan will raise growth to around 3% on average over the next 10 years.
“Our recovery will be propelled by swift reforms to unleash the potential of the economy, and supported by an efficient state that is committed to clean governance.
It will be transformative,” says Ramaphosa. “It will be inclusive. It will be digital, green and sustainable, and it will invest in our human capital to lay the foundations for the future.”
He adds that the country needs to focus on a few high-impact interventions and ensure they are executed swiftly and effectively.
The reconstruction and recovery plan has four priority interventions.
The first is a massive rollout of infrastructure throughout the country. A robust pipeline of projects has been developed. By the end of June 2020, there were 276 catalytic projects with an investment value of R2,3-trillion.
In addition, a list of 50 strategic integrated projects and 12 special projects was gazetted in July 2020. They have been prioritised for immediate implementation with all regulatory processes fast-tracked, and will enable over R340-billion in new investment.
The infrastructure build programme will focus on social infrastructure such as schools, water, sanitation and housing. It will focus on critical network infrastructure such as ports, roads and rail.
“We have taken steps to remove the constraints that have hampered infrastructure delivery in the past,” Ramaphosa says.
Infrastructure SA and the Infrastructure Fund, with the capacity to prepare and package projects, have been established.
The Infrastructure Fund will provide R1000billion in catalytic finance over the next decade, leveraging as much as R1-trillion in new investment for strategic infrastructure projects.
The second priority intervention is to rapidly expand energy generation capacity.
Implementation of the Integrated Resource Plan has been accelerated 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.
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 12 months.
In addition, the process to implement bid window 5 of the renewable energy programme has begun.
“The current regulatory framework will be adapted to facilitate new generation projects while protecting the integrity of the national grid,” Ramaphosa says. “Applications for own-use generation projects are being urgently fast-tracked.”
The work of restructuring Eskom into separate entities for generation, transmission and distribution continues and will enhance competition and ensure the sustainability of independent power producers going forward.
To achieve this, a long-term solution to Eskom’s debt burden will be finalised, building on the Social Compact on Energy Security recently agreed to by social partners.
“Through these measures, we aim to achieve sufficient, secure and reliable energy supply within two years,” the president says.
The third key intervention is an employment stimulus to create jobs and support livelihoods.
R100-billion has been committed over the next three years to create jobs through public and social employment as the labour market recovers.
The employment stimulus is focused on those interventions that can be rolled out most quickly and have the greatest impact on economic recovery.
At the heart of the employment stimulus is a new approach to public employment which harnesses the energies and capabilities of the wider society, Ramaphosa explains.
“It uses the considerable creativity, initiative and institutional resources that exist in our society to respond to local community priorities. These activities will be locally driven, allowing participants to earn an income while contributing to their community.”
He adds that government will expand 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.
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.
To assist young people who are unemployed to access these and other opportunities, the national Pathway Management Network will soon be launched as a platform for recruitment and other forms of support.
“Finally, the employment stimulus includes direct support for livelihoods and the protection of jobs in vulnerable sectors,” the president says. “Support is being provided to more than 100 000 early childhood development practitioners and to 75 000 small-scale farmers whose production was disrupted by the pandemic.”
The Special Covid-19 Grant has been extended by a further three months.
The fourth key intervention is a drive for industrial growth.
“This is in the context of a steady decline of our manufacturing base over many years,” says Ramaphosa. “To place our economy on a new trajectory, we are going to support a massive growth in local production and make South African exports much more competitive.”
Through the first two South African Investment Conferences, the country has secured pledges of around R664-billion in new investment.
To date, just under R170-billion of capital expenditure committed during those investment conferences has been invested in projects for construction and buying equipment is essential to mining, manufacturing, telecommunications and agriculture.
“South Africa currently imports around R1,1-trillion of goods, excluding oil, each year. If we were to manufacture just 10% of these goods locally, it is estimated that we could add 2 percentage points to our annual GDP.
“The rest of Africa currently imports R2,9-trillion worth of manufactured goods from outside the continent each year. If South Africa were to supply just 2% of those goods, it would add 1,2 percentage points to our annual GDP.
“And if we succeed in reaching our target of R1m2-trillion in new investment by 2023, it could add around 2,5% to our annual GDP.”
It is to realise this huge potential that the social partners have agreed to prioritise a range of consumer and industrial products for local procurement, Ramaphosa says.
The NEDLAC agreement commits all companies and government entities to publicly disclose in their annual reports the value of procurement from local producers and on steps to be taken to improve localisation.
The social partners have also 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.
“We call on every South African to contribute to our recovery effort 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.”
An important part of growing the industrialisation effort are the sectoral masterplans, which bring all partners together to agree on specific measures to improve productivity, investment and competitiveness.
There are currently masterplans in the automotive, clothing and textile, poultry and sugar sectors.
Work is underway 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.
“In promoting localisation and industrialisation, we will be focusing in particular on the development of small, medium and micro enterprises,” Ramaphosa says. “This will take place alongside the development of rural and township economies.”
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, SMME participation in the manufacturing value chain will be supported.
In addition to these priority interventions, Ramaphosa says work is ongoing to create enabling conditions for a competitive, inclusive and fast-growing economy.
“We are fast-tracking reforms to reduce the cost of doing business and lower barriers to entry.”