Economists react to Ramaphosa’s recovery plan: Where are the details?

President Cyril Ramaphosa on Thursday (15 October) presented his much anticipated economic reconstruction and recovery plan in parliament, broadly outlining what government will be doing over the next few years to bring South Africa’s economy back from the brink, and create hundreds of thousands of much needed jobs in the process.

While the president’s speech touched on the points that economists and analysts wanted to hear, it lacked on implementation details.

Instead, the president merely touched on the same discussion points that have been raised since the February 2020 State of the Nation Address, economists said, adding more talk to what has become the hallmark of the ANC-led government: plan, but no action.

“To be different, the speech today needed to show real grid and detail on implementation – on that it failed,” said Intellidex analyst Peter Attard Montalto.

“(The speech) lacks detail in important areas and, unfortunately, the implementation approach for the various elements of the strategy is not convincing,” said Business Leadership South Africa.

Despite the evident problems over implementation, analysts noted that some segments are positive.

“The most encouraging part of the plan is the focus on fighting corruption. It is essential that government delivers on this promise. It is the key to rebuilding public trust and boosting confidence,” said Nedbank’s economic unit.

“We welcome and agree with the president’s focus on jobs, growth, debt reduction and the essential participation by the private sector,” said Business for South Africa.

However, a clear call for swift implementation of the various projects mentioned remains top of the list.

And as stated by many analysts and economists in response – this is the one aspect where the government has a poor track record.

Below, we outline what economists and analysts thought of the presentation:

Intellidex: Policy is ‘ok’, but implementation credibility is shot

Intellidex analyst Peter Attard Montalto said that the speech – in terms of policy at least – was more good than bad.

The positives found in the plan to create jobs (albeit temporary, smaller in scale, and stretched over a longer time) and the wider economic stimulus – particularly around tourism and making it easier for businesspeople to travel to South Africa – were check marks for the economy.

But other aspects of the plan, like the president’s “unrealistic” energy goals, threatened to undermine the recovery goals completely.

“A commitment to ‘achieve sufficient, secure and reliable energy supply within two years’ is completely unachievable, even with the best will in the world and ideal policy – and actually damaged the credibility of the whole speech,” Attard Montalto said.

The lack of detail on how any of the plans will actually be implemented is a huge negative, and pointed to the ‘same old’ talk coming from government, with no indication that any policy blockages will be removed.

“Overall, the speech missed the bar on what mattered – implementation details,” the analyst said. “Our baseline remains that, simplistically, ‘all reform is happening’ – just without the necessary speed and effectiveness of implementation.”

BLSA: It’s just the starting point

Business Leadership South Africa said that the president’s address did a good job in presenting a ‘concrete plan of action’ for the path to recovery – but it is simply a starting point, and lacks much of the detail that businesses were expecting.

“Much of it can’t be implemented immediately – which is what we need – while it lacks specifics in some areas and is based on unrealistic assumptions in others,” the group said.

The president’s goal of having reliable, stable energy in two years is unrealistic, it said, given the fact that a new Integrated Resource Plan needs to be drawn up due to underestimations in the 2019 document.

The infrastructure plans, meanwhile, seem a long way off, with many projects still needing to clear feasibility hurdles and other red tape.

BLSA was positive about the job creation and local manufacturing plans, saying these are positive steps addressing more immediate needs. However, they too come with problems – specifically that the jobs are temporary, with no clear plan on how to grow the economy to secure more permanent work, and there is no real position to address the underlying problems that have led to the deterioration of local manufacturing.

Sakeliga: ‘Hollow’ plan, while restrictions stay in place

Business group Sakeliga said that the government can’t talk of recovery while it actively continues to restrict businesses through the state of disaster and lockdown regulations.

“Recovery cannot be based on continuing the state of disaster, and increasing taxes, government expenditure and government intervention,” said CEO, Piet le Roux.

“The ‘recovery plan’ is flawed in that it, once again, places government at the heart of economic development – instead of reserving that space for the private sector. If anything, this is nothing more than a plan for expanding government,” he said.

The group said that it is unthinkable that other business groups such as Business Unity South Africa (BUSA) and Business for South Africa (B4SA) will give unqualified support the plan when it enforces government’s current trajectory.

“If government wants to avoid crisis, it needs to change course – not accelerate,” it said.

It did express some support for some aspects of the plan, but said these are outliers, and that in terms of implementation, “little has come of previous undertakings by Government in this regard”.

B4SA: Good plan – now we need to implement it

Business for South Africa, which contributed to discussions for the recovery plan at Nedlac, said it was happy with the outcomes presented by the president.

It said that the next step is to move to the immediate implementation of the plan, with clear timelines.

It said the four pillars highlighted by the president are aligned with the discussions held between all social partners, facilitated by Nedlac, adding that business is committed to supporting these plans if implemented efficiently and transparently.

“We now need to urgently implement the recovery plan, give effect to the structural reforms that have been outlined, continue addressing corruption in the public and private sectors and rapidly increase state capacity.

“All of this is required if South Africa is to attract the necessary investment, create sustainable jobs as well as reignite and maintain meaningful and inclusive economic growth,” it said.

SEIFSA: There’s nothing without implementation

Steel and Engineering Industries Federation of Southern Africa Chief Economist, Michael Ade, said that the economic recovery plan hinges on implementation – without which, any goals the government is trying to achieve will fall apart as job losses continue to mount.

The group pointed to the latest jobs data published in Stats SA’s latest Quarterly Employment Survey, saying that continued job losses run counter to any recovery plan.

“(The recovery plan) needs all productive hands on deck in order to ensure success,” Ade said.

“The concern is that as companies continue to struggle with cashflow challenges, with no delineated implementation plan regarding the novel economic recovery plan in sight, and amid the on-going coronavirus pandemic, it is hard to forestall an immediate end to the trend of poor employment numbers in the short-term.”

While ‘commendable efforts’ are being made by policy makers – on paper – to curb unemployment and reduce difficult business conditions, there is invariably a gap in co-ordinating the activities of the relevant government departments or agencies, resulting in delays in implementation, the economist said.

Nedbank: South Africans have been asked to take a leap of faith

Nedbank said that the president’s plan sets some bold goals – but has in effect asked South Africans to take a leap of faith that, somehow, things will be different this time.

The recovery plan hinges on a massive infrastructure drive, which government hopes to tap into South African pensions to finance. Nedbank said that by changing Regulation 28 of the Pension Funds Act, government will be able to source funding for some of its plans.

While this is not unique to South Africa, and has even been recommended by the International Monetary Fund’s Fiscal Monitor, “what is problematic in the South African case, is government’s poor track record of delivering infrastructure on time and on budget,” the bank said.

“Not only are the returns on public investment in South Africa low, but in many instances they are negative. Medupi and Kusile are prime examples.”

Regarding the other measures in the plan, the bank is most optimistic about the measures to fight corruption, saying the rest of the plan’s effectiveness will depend on how quickly each project can be implemented.

“However, the central feature of the plan – the infrastructure drive – will be difficult for government to get off the ground.

“Even if government managed to overcome its protracted skills and systems constraints in project management, the state will still have to find a solution to the skills exodus and diminished capacity within the construction sector,” it said.

Read: This is South Africa’s economic recovery plan – including creating 800,000 new jobs

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Economists react to Ramaphosa’s recovery plan: Where are the details?