While current government attention is focused on mitigating the immediate fallout from the Covid-19 crisis, last week provided some insight into the ANC’s thinking around the reconstruction of the economy post the crisis, says the Bureau of Economic Research (BER).
It said that the governing party foresees an increased role for the state in driving the recovery, which will include pushing ahead with a state bank and a government-owned pharmaceutical company.
Covid-19 could also provide new impetus for implementing national health insurance (NHI).
“A key pillar of the post-Covid rebuilding seems to be an accelerated roll-out of infrastructure investment,” the BER said.
In line with this, president Ramaphosa said on Sunday (31 May) that while the current R500 billion fiscal support package was crafted to deal with the current crisis, more is needed.
“We have heard the infrastructure drum being banged before. What may be different now is that given precarious public finances, the ANC seems to realise that this programme – valued at R350 billion – will need to be financed by increased loans from developmental finance institutions (DFIs) and the private sector.
“The possibility was again raised to amend legislation in order to nudge private and public pension funds into financing these projects, possibly through some form of a prescribed assets regime.
“Furthermore, some reports suggested that a draft internal ANC document suggested that the SA Reserve Bank (SARB) should directly fund DFIs in order to ensure greater access to infrastructure-related loans.”
The BER noted that this would not be in line with the central bank’s constitutionally-enshrined mandate.
Micromanaging the economy
Globally, an increased role for the state may be one of the legacies of the health crisis, the BER said.
“In our view, if the South African state were to play a more active role in facilitating increased private sector fixed investment, including but not limited to the green energy space, this would be most welcome,” it said.
“More generally, a state that is more assertive in lowering the barriers (cost) of doing business in South Africa could go some way in supporting the post-crisis recovery.”
Among others, the BER said that this could include improved infrastructure at the ports, bringing down data costs through the speedy licencing of broadband spectrum, doing away with collective wage bargaining, etc.
However, the group warned that if the government plans to more directly intervene and micromanage the economy the country’s recovery could be negatively impacted.
“The latest state bungling of the reopening of schools has again put the spotlight on 1) state inefficiencies in SA and 2) the disruptive impact that ANC alliance partners can have at critical points in time.
“Ramaphosa (again) gave mixed messages on the reform agenda yesterday. He emphasised the need for structural reforms, linking this to localisation of production and the strengthening of the informal sector.
“At the same time, the president was “gung-ho” about the revival of SAA,” it said.