South Africa does not have a viable economic recovery plan: analyst

 ·21 Sep 2020

Despite talking up compacts and agreements around South Africa’s Covid-19 economic recovery plan, there is little to show for it beyond grand speeches – continuing a government trend.

Briefing the nation about South Africa’s move to lockdown level 1 last week (16 September), president Cyril Ramaphosa talked up a meeting with the National Economic Development and Labour Council (Nedlac), where an economic recovery plan was “agreed upon”.

This plan, the president said, is directed towards building confidence and placing the country 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 president 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.

In this regard, the Nedlac compact aims to push Eskom toward being self-sustainable, and placing the responsibility on the power utility to cut costs. According to the agreement, seen by the Daily Maverick, focus is placed on tariffs, debt and additional generating capacity.

There are also calls for debt to be paid up – vital, considering over R31 billion in unpaid debt is owed by municipalities – as well as a push for prepaid metres to be installed in all homes.

However, despite the specific focus laid out in the compact, no timelines are provided.

The same trend is seen in other government plans for economic recovery, such as the infrastructure projects and spectrum auctions.

The need for certainty and delivery timelines on these agreements, plans and promises is now more urgent than ever, given the dire economic outlook for South Africa. In the second quarter of the year – amidst the strictest of the country’s lockdown – GDP declined by 16% quarter-on-quarter in real terms, and by 51% on a seasonally adjusted and annualised rate.

This massive drop sets South Africa up for an annual decline of between 7% and 8%, according to analysts, with urgent reforms required to aid recovery.


Despite the bold promises contained in the Nedlac agreement, Intellidex analyst Peter Attard Montalto said that it has created some confusion in the market – most notably because no one is quite certain what the agreement represents: is it a set plan? Or is it just lip service?

According to Attard Montalto, it leans toward the latter.

“A compact does not bind any party and is not ‘the government recovery policy’ – even if a Nedlac plan is ‘noted’ by cabinet,” he said.

“The simple fact is the government does not have a meaningful or viable recovery plan in part, given the lack of leadership from its cabinet cluster committee chairs. As such we are likely to see much ‘hot-air’ PR forthcoming on a recovery plan, rather than a shift of the dial at a high level.”

The analyst said that this is a recurring pattern within the government – where plans are talked up and broadly laid out, but come with zero commitments or timelines whereby government can be held to account.

In fact, he said, the latest ‘commitments’ for economic recovery are the same that Ramaphosa made during the latest as well as previous state of the nation addresses (SONAs) – which government has subsequently failed to deliver on.

“There are commitments on infrastructure, energy, spectrum etc. All the usual,” he said.

In the February 2020 SONA, the president took a hopeful slant on South Africa’s many problems – such as declining economic growth (even before the Covid crisis), problems at Eskom and government spending – with Ramaphosa insisting that the state has a plan which is already in motion.

Reaction to the SONA from all segments of the economy, was that the address was more of the same, talking up big dreams and empty promises, which many analysts viewed as impossible to achieve without political will. Ratings agencies were unmoved, focusing on government’s track record of failing to deliver.

The latest compact follows the same patterns, Attard Montalto said.

Doesn’t mean much

“This compact doesn’t bind each party in any way. Organised business is not able to make meaningful investment or job creation promises on behalf of its members, labour have no real power to offer up anything. As such, one gets warm and fuzzy language but this needs to be cut through.”

Attard Montalto said that it could be seen as meaningful to write down these commitments, “and indeed Nedlac is now pushing government to commit to timelines”.

However, he noted that timelines tied to SONAs in the past have been used to try and hold government to account, “and that didn’t work”.

“This is what will happen now as well,” he said.

The main problem, he said, is that the government lacks capacity to actually implement the plans. Some progress can be made in small steps, but cabinet as a whole does not move in the same direction, with a few ‘problem ministers’ holding back reform in major portfolios – such as energy and tourism.

“Put simply – the market will soon forget about the Nedlac process and any forthcoming rhetoric and grand launches and speeches. We will have business as usual without changes to personnel, capacity and institutions,” he said.

“Going forwards cabinet will ‘note’ the Nedlac agreement, but does not have the institutional capacity to do anything with it as a result.”

Read: South Africa moves to lockdown level 1 – here are the changes

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