South Africa President, Cyril Ramaphosa has said the country will embark on a major public works and job-creation drive in response to the coronavirus crisis whiles unveiling a plan to return Africa’s most industrialised economy to growth.
Under pressure after data showed the largest-ever gross domestic product (GDP) contraction in the second quarter, President Ramaphosa said his plan could unlock more than one trillion rand ($60bn) in investment over the next four years and create more than 800,000 jobs.
He added that modelling by the National Treasury showed it could raise annual economic growth to an average of around 3 percent over the next decade.
“Despite these vital interventions, however, the damage caused by the pandemic to an already weak economy, to employment, to livelihoods, to public finances and to state-owned companies has been colossal,” Ramaphosa told a joint sitting of parliament.
South Africa was in recession before it recorded its first coronavirus infection in March, with one of the world’s strictest lockdowns and a global drop in demand for its exports causing GDP to fall by more than 17 percent in annual terms in the April-June quarter, when more than two million jobs were lost.
Ramaphosa’s government has been in talks with business and labour leaders for months trying to plot a path to recovery.
He also said that an infrastructure build programme would focus on schools, water and sanitation and housing, as well as ports, roads and railways.
Other parts of the plan include expanding power generation capacity to ensure reliable supplies, local production targets in sectors like agro-processing, healthcare and industrial equipment, and pushing through reforms to ease regulatory bottlenecks, including for miners.
A COVID-19 relief grant has been extended for a further three months, and 100 billion rand has been set aside over the next three years for job creation initiatives, Ramaphosa added.
The president’s speech comes two weeks before Finance Minister, Tito Mboweni will lay out spending plans at a mid-term budget.
Ahead of Mboweni’s speech, President Ramaphosa said the country could not sustain current levels of public debt, as rising borrowing costs are diverting resources needed for economic and social development.
A Johannesburg-based political and economic risk consultancy, Eunomix Business & Economics Ltd had earlier predicted South Africa faces a precipitous economic and political collapse by 2030 unless it changes its economic model and implements growth-friendly policies.
“Bar a meaningful change of trajectory, South Africa will be a failed state by 2030,” Eunomix said in a report.
The report also disclosed that while less than a quarter of the population is in work, South Africa’s wage bill as a percentage of gross domestic product significantly exceeds that of countries such as India, Thailand and the Philippines.
As a result, Eunomix’s recommended that the South African government should 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 report said the ANC’s strategy is “a dichotomy born of apartheid, resistance and crystallized by ideological puritanism and entrenched interests.
“The country should not choose between imagined opposites. It should adopt a dual-track approach that reconciles them.
“The pandemic is the last nail in the coffin of strategic fiasco. The economy is unsustainably narrow and shallow. It rests on a small and declining working population burdened by very high debt and taxes.”
