What to expect from Ramaphosa’s new recovery plan for South Africa

 ·16 Sep 2020

The National Economic Development and Labour Council (Nedlac) has agreed to an action plan for South Africa’s economic recovery, the presidency said in a statement on Tuesday evening (15 September).

The plan will is directed towards building confidence and placing South Africa on a path of investment and growth.

“Social partners have identified priority areas for rebuilding the economy as well as structural reforms and other programmes which will enable sustainable and inclusive growth with an intensive focus on job creation,” the presidency said.

While the final details of the plan will only be announced once it is finalised by cabinet, the presidency said that a core focus will be on addressing Eskom’s structural and funding problems.

“Social partners have also agreed on a social compact which commits government, business, labour and community to mobilising funding to address Eskom’s financial crisis in a sustainable manner – in return for an efficient, productive and fit-for-purpose Eskom that generates electricity at affordable prices for communities and industries,” it said.

A copy of the agreement, which has been seen by Bloomberg, calls for Eskom’s R488 billion of debt to be reduced and for adequate resources to be “mobilised” to ensure it becomes financially sustainable – but is scant on detail on how this will be done.

The plan makes no mention of a previous proposal for the Public Investment Corp, which manages the pensions of state workers and has assets of R2.1 trillion, to take over part of Eskom’s debt. Institutions that make funds available must do so within the mandates and risk-mitigation processes can’t be compromised, it says.

Other key points of the agreement include:

  • The pact commits the government to removing all regulatory obstacles that hinder companies from generating their own electricity, while businesses agreed to implement projects to add 2,500 megawatts of supply within two years;
  • The government also agreed to buy an additional 2,500 megawatts of emergency power, 500 megawatts more than previously announced;
  • Eskom was given the green light to renegotiate overly onerous contracts with coal suppliers and independent producers of green power that supply the national grid as soon as possible;

The president welcomed the social partners’ plan for economic recovery as a demonstration of collaboration that had produced “a significant milestone in the history of our democracy and the advent of a new era of confidence” .

“This is a great achievement that rises to the challenge of the moment,” he said.

Infrastructure development 

BusinessDay reports that another key pillar of the plan will be infrastructure, with a massive development drive seen as key to driving recovery post-lockdown and creating jobs.

This comes after the presidency published a list of projects of ‘priority infrastructure projects’, which is expected to pave the way for the beginning of private investment in a R2.3 trillion program over the next decade.

President Cyril Ramaphosa has said that infrastructure development will form a key part of South Africa’s economic response to the coronavirus pandemic.

“Investors from the multilateral development banks, development finance institutions and the private sector all showed a strong appetite to make the necessary investments to meet South Africa’s extensive and diverse infrastructure needs,” he said in a statement in July.

“In the coming weeks, we will work with our social partners to finalise an economic recovery programme that brings together the best of all the various proposals. The most important part of that programme must be the protection and the creation of jobs.”

Ramaphosa said that if the country is to recover from the worst effects of the pandemic, it also needs well-crafted public employment schemes.

“Creating jobs for people that add value to their communities through maintenance, care work and other services, keeps people engaged in productive activity. It helps them to retain and to develop skills,” he said.

Read: Push to reopen South Africa’s international borders by next month

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