Ramaphosa’s economic recovery plan: here are the basics

President Cyril Ramaphosa set himself a mammoth task during the announcement of his South African Economic Reconstruction and Recovery Plan, during a joint sitting of the National Assembly and the National Council of Provinces.

Ramaphosa announced a set of extraordinary measures to restore confidence in the country’s economy, with the main objectives being the job creation through aggressive infrastructure investment, as well as re-industrialisation through growing small business, while strengthening medium and large businesses.

He conceded that while the country faced “immense challenges in the many years before the Coronavirus hit us,” the pandemic has worsened the impact of these challenges.

His recovery plan is based on four priority interventions, namely:

1. Vast infrastructure development rollouts countrywide,
2. Rapid expansion of energy generation capacity,
3. Employment stimulus, to create at least 800,000 jobs in the immediate term, and
4. Driving rapid and sustained industrial growth.

The plan is expected to be implemented immediately, but recognising the dire situation of poverty which the Covid-19 pandemic has created, Ramaphosa announced that the current Covid relief grants would be extended for a further three months.

Read more: Economic Reconstruction and Recovery Plan: show us the money

This is only stopgap measure, however, as the country could not afford to extend this relief for any longer than three months, while the real job of resuscitation the economy gets under way.

The ultimate hope is that the successful implementation of the plan will contribute an additional 1,7% to South Africa’s baseline of 1,3% economic growth, which would bring the country’s average growth to 3% per annum.

Some of the details of each priority intervention are outlined below:

Infrastructure development:

The President foresees infrastructure development as being a key driver of economic stimulus and growth, which will develop other sectors of the economy, while creating employment.

He said they have several projects n the pipeline, which will “completely transform the landscape of our cities, towns and rural areas”.

First among these are 276 “catalytic projects” with an investment value of R2.3 trillion which have been agreed upon by the end of June 2020. A further 50 “strategic integrated projects and 12 special projects” were Gazetted in July.

These projects are suppose to enable over R340 billion in new investment, and have been prioritised for immediate implementation. Regulatory processes for all of them will also be fast-tracked.

The President said this priority area will focus on social infrastructure such as schools, water, sanitation and housing projects, as well as infrastructure such as ports, roads and rail that are key to economic competitiveness.

“To ensure that there is active implementation of our infrastructure built programme, we have established Infrastructure SA and the Infrastructure Fund with the capacity to prepare and package projects. This approach is already encouraging private investors to help us build capability for infrastructure delivery within the state and to develop blended financing models.

Read more: ‘No political interference in law enforcement,’ says Ramaphosa

“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 apparently already in construction, including human settlements representing an investment value of R44.5 billion.

Rapid expansion of energy generation capacity:

Even more ambitious than the infrastructure plan, is the announcement of a plan to see massive expansion of the country’s electricity generation capacity over the following two years.

This hopes to see the accelerated implementation of the Integrated Resource Plan, which would see an increase in the contribution of renewable energy sources and independent power producers to the country’s grid.

Through increased renewables, battery storage, and gas technology, the President hopes to add 11,800 MW of new generation capacity to the system by 2022, with more than half of this coming from renewables.

By June next year, he hopes to see independent power producers to add over 2,000 MW to the grid, with the current regulatory framework to be adapted to facilitate new generation projects while protecting the integrity of the national grid.

Eskom’s unbundling into entities for generation, transmission and distribution also continues, while a long-term solution to getting rid of the electricity giant’s debt burden will apparently be finalised soon.

Employment stimulus:

Large-scale job creation interventions are on the cards, which will be driven by the state, as well is its social partners.

Ramaphosa said: “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.”

There will be a greater focus on creating jobs that “respond to local community priorities,” which means that job creation activities will focus on earning an income while contributing to their local economies.

One intervention which was greeted with applause from those in attendance in Parliament, was the plan to see 300,000 opportunities for young people to be employed as “education and school assistants” countrywide.

They will help teachers in basic tasks, to increase time spent teaching, and enable catch-up on lost learning due to the pandemic.

Maintenance and construction of roads and municipal infrastructure will also see the creation of at least 60,000 more labour-intensive jobs, while an additional 6,000 community health workers and nursing assistants will be deployed to healthcare facilities, as the National Health Insurance is expected to roll out.

Ramaphosa promised that recruitment will be “fair, open and transparent, and that opportunities are advertised widely”.

Finally, support will also be provided to more than 100,000 early childhood development practitioners and to 75,000 small-scale farmers.

Stimulating industrial growth:

Government will attempt to revitalise the economy with a plan to support growth in the local manufacturing industry, and “make South African exports much more competitive”.

Ramaphosa said this will leverage off work done before the pandemic such as during the two investment conferences during which the country secured pledges of approximately R664 billion.

“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,” he said.

The plan hopes to see 10% of goods which are currently imported at a cost of R1,1 trillion per year, manufactured locally. This would add two percentage points to the country’s GDP.

But the plans for increasing local manufacturing go much further than simply producing goods for local use.

“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 R1.2 trillion in new investment by 2023, it could add around 2.5% to our annual GDP.”

Government will soon publish localisation targets for goods in areas like healthcare, basic consumer goods, industrial equipment, and construction materials. There are also plans for ensuring all public infrastructure projects use locally-made materials.

The plan also hopes to ensure transformation, by “creating space for new black and women entrants and take deliberate steps to change ownership and production patterns”.

Ramaphosa promised to create “enabling conditions for a competitive, inclusive and fast-growing economy”.

This will see a reduction in the cost of doing business, as well as lowering barriers to entry, in some areas such as mining, and for water and environmental licences, by as much as 50%.

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