The National Planning Commission (NPC) has published a new report which focuses on the ‘course correction’ of South Africa’s economy.
The commission was established in 2010 to develop a long term vision and strategic plan for South Africa and falls under the Department of the Presidency.
Its report found that over the past decade there have been clear signs of danger that South Africa could veer towards a downward spiral.
“Governance gaps have now spilled over into the central processes of raising and distributing public resources. We are now beyond the cross-roads: kickstarting the economy out of a stasis now seems like a relatively simple challenge,” it said.
It added that the Covid-19 pandemic has accelerated the downwards spiral, in an already vulnerable economy.
“We are in a vicious circle ensuing from a toxic confluence of factors, namely falling investment, further diminishing tax revenues and debt service costs that crowd out all other spending and thus constrain resources for investment in development.
“The results are falling employment and rising poverty and inequality,” it said.
The NPC said that government has fallen short of what needs to be done to meet the National Development Plan (NDP) goals set for 2030, adding that many of the shortcomings are driven locally and are, in-effect, own-goals.
It said that to accomplish these targets, the plan needs a capable state, with better planning and policy continuity.
“Since the issuing of the NDP, the NPC has not communicated forcefully enough on the need for better planning and for policy continuity,” it said.
“South Africans understandably take pride in the resolution of crises but ultimately the aim should be to mitigate risk and avoid self-inflicted crises. There are external forces, such as those related to global markets, which cannot be controlled. However, many of the critical risks facing South Africa are domestic in origin, and controllable.
“Those matters that are within our control, and particularly those that are delivered directly through government and related institutions, should not be a source of instability, uncertainty and growth strangulation, no matter the scale of the external factors.”
The NPC said that a contracting economy, falling employment, rising poverty and diminishing state resources and capacity pose a serious threat to achieving NDP 2030’s goals of full employment and a decent life or all. Thus, urgent action is needed for revitalisation and transformation.
To address these issues, the commission has outlined a list of recommendations which need to be pursued across a variety of sectors.
The proposals are all based on achieving longer-term results for the coming decade but with a focus on short- and medium-term implementation to lay a foundation for success.
1. Responding to the Covid-19 pandemic
“The Covid-19 pandemic has done significant harm to an already bruised economy. Safely returning to work and actively promoting employment must be a top priority for economic policymakers
and stakeholders over the coming few years,” the NPC said.
To achieve this:
- Ensure the adoption of risk-adjusted strategies to support safe human interaction in communities, at work, in transport and in education;
- Deepen financial support to businesses and workers who continue to be at risk;
- Boost employment sectors with significant potential to absorb labour and create substantial linkages to other sectors of the economy;
- Drive a tourism recovery plan;
- Expand public employment programmes.
2. Actions to restore fiscal and financial sustainability
The goal is to restore a pathway to sustainable flow of public sector resources on both the revenue and expenditure sides. This includes:
- Restoring and modernising tax collection capability;
- Raising impact of current spending;
- Restoring confidence in the budget process and commitment to a fiscal framework;
- Charting public sector bargaining to a sustainable result;
- Restoring governance in top infrastructure SOEs;
- Stabilise municipal finances;
- Taking credible action in top locations where there is risk of corruption.
3. Building the asset base: Capital
“The foundations to promote investment are found in the eight sections of the report, showing how to improve the confidence of investors and attract capital. The recommendations below focus on strengthening public sector infrastructure and the civil construction sector,” the NPC said.
- Rebuild the private civil construction sector;
- Drive implementation of top public infrastructure programmes;
- Reduce the infrastructure maintenance backlog across the state, especially in local government;
- Increase the capacity of the state to spend infrastructure budgets effectively;
- Restore governance in top infrastructure SOEs;
- Increase opportunities for private sector investment in infrastructure;
- Eliminate the ‘construction mafia’.
4. Building the asset base: People
Here, the aim is to drive transformation through high priority education improvements including:
- Developing a standardised accountability framework in the school system;
- Raising the standard of reading comprehension and numeracy in the foundation phase;
- Strengthening monitoring of education sector trends to better understand ‘what works’ and how to course-correct where needed;
- Ensuring all schools have internet and supportive digital services, along with investment in digitally-enabled teaching and learning practices;
- Strengthening youth pathways from learning to earning;
- Driving equitable access for poor and working-class students to higher education and training, including a review of the funding model;
- Deepening incentives for vocational training;
- Enhancing support for work-seekers and placement – particularly the youth;
- Expanding of social protection and work-linked entitlements to vulnerable and non-standard workers.
5. Digital readiness for the future
- Accelerate the digitisation of government;
- Migrate and release high-demand spectrum. Evaluate whether a WOAN is the best option to achieve the desired competitive access to wholesale networks;
- Deepen the ICT skills base;
- Enable e-commerce, digital finance and digital entrepreneurship;
- Strengthen partnerships to deliver on SA Connect.
6. Dynamism in employment-creating industries
- Promote employment creating sectors;
- Make more capital available for labour-absorbing investments;
- Stimulate foreign demand, with immediate prioritisation of tourism;
- Ease visa requirements;
- Mitigate threats to industry and jobs caused by governance gaps;
- Drive construction activity;
- Align public sector performance indicators more explicitly with expert performance;
- Build capacity in critical areas that facilitate trade, such as standards-setting bodies, phytosanitary standards-setting and inspectorate, and veterinary controls;
- Stabilise and deepen the approach to promoting black empowerment;
- Prioritising the effort to revitalise township and village economies;
- Shifting focus of SMME support to promoting entrepreneurship and dynamism – particularly among black Africans – by adopting a ‘life-cycle’ approach.
Other recommendations focus on better dealing with public employment and building a more capable state.