On 4 September, South Africa slipped into recession for the first time in nine years. To reverse the economic contraction, President Cyril Ramaphosa came up with a stimulus package that will include every sector, financial and non-financial and boost investor confidence.
The plan, which will include the reprioritisation of the current budget and the establishment of an infrastructure fund is expected to ignite recovery, restore investor confidence and prevent job losses.
The economic shake-up to stimulate growth comprises amendments and regulations pertaining to minor travelling, a list of countries that need visas to enter South Africa and the implementation of the proposed electronic visa. According to Ramaphosa, numerous international and external factors have negatively affected South Africa’s growth, especially South Africa’s restrictive visa regime that makes it difficult for tourists and businesses to visit the country. Changing the visa architecture and reprioritising the direction of spending towards agriculture and rural areas will have the greatest impact on economic growth.
More funding will be designated for infrastructure and it will be directed towards roads, human settlements, roads, student accommodation and transport. In addition, a ten-person advisory panel has been appointed to advise the government on how to implement a fair and equitable land reform process.
This reprioritisation, Ramaphosa noted, is because the government has limited fiscal space to increase borrowing. Nema Ramkhelawan-Bhana head of markets research for Rand Merchant Bank (RMB), told News24 that the recovery of South Africa’s currency could be possible if the stock exchange market is enthused by Ramaphosa’s economic stimulus package. According to Ramkhelawan-Bhana, “we are not expecting miracles with the government’s strategic reprioritising of existing funds to important sectors to alleviate unemployment and accelerate productivity growth. But it is a step in the right direction”.