How President Ramaphosa plans to revive South Africa’s economy

South Africa will review electricity and port tariffs, President Cyril Ramaphosa said Friday, while announcing measures agreed by Cabinet to reignite growth, stimulate economic recovery and secure confidence in sectors affected by regulatory uncertainty and inconsistency in the country. Ramaphosa made the announcement at the Union Building in Pretoria.

“To reduce the cost of doing business and to boost export and make the South African industry more competitive, government has begun a review of various administrative prices, starting with electricity, ports and rail tariffs. These have been raised as matters of great concern by a number of players. We are now beginning a process of looking at all these,” Ramaphosa said, adding that “Within the next few weeks, government will initiate the process for the allocation of high demand radio spectrum to enable licencing.”

The president had last week, shared an outline of an economic stimulus package, which he believes will spark economic activity in the country, with South Africa’s business and labour leaders during a consultative meeting in Pretoria after the economy entered a technical recession.

Ramaphosa said that the GDP growth recorded in the first two quarters of 2018 showed that South Africa’s “economic challenges are huge and our difficulties are severe” and would need extraordinary measures and would take time for the country to overcome. “This is the reality that we are having to deal with.”

“The stimulus and recovery plan has a number of broad areas,” he explained. “Firstly, the implementation of growth enhancing economic reforms. Secondly, reprioritisation of public spending to support job creation. In other words, we are reprioritising our current budget to focus on very urgent issues that can have an impact on our current economic situation.”

The third area, according to the president, is the establishment of an infrastructure fund which will be called South African Infrastructure Fund, which he expressed confidence, would transform the rollout of infrastructure projects in the country. He called on the private sector to collaborate with the government to make it work.

A team within the presidency will be appointed to oversee implementation of the Fund.

Ramaphosa continued: “Fourthly, we will be addressing urgent and pressing matters in education and health. The fifth one will be investing in municipal social infrastructure improvement in the various municipal areas in our country that have dire needs that we have to address with immediate effect.”

The South African president also said that necessary policy actions that will encourage investors to continuing doing business in South Africa are being taken. He promised that separate legislation for the regulation of the oil and gas industry will be drafted using the government’s legislative process.

On how the government will fund the stimulus package, which the president said would cost R50 billion, Ramaphosa said the funding will be a blend of equities, debt, bonds, as well as support from the New Development Bank, the multilateral development bank established by the BRICS states.

He also said that the government is finalising visa agreements with a number of countries to boost tourism.

“We are decisively and rapidly accelerating the implementation of key economic reforms that will unlock greater investment in important growth sectors. These reforms include immediate changes approved by Cabinet to South Africa’s visa regime,” he said.

Ramaphosa’s focus is on the areas of economic activity that will have the greatest impact on youth, women and small businesses, following years of slowing pace of growth, high inequality and unemployment.

Unemployment increased to 27.2 percent in the second quarter of 2018. The expanded unemployment rate, which does not take job search into account, was even higher, increasing from 30.9 percent in 2008 to 37.2 percent in 2018, according to Statistics SA. With opportunities few and far between, many South Africans, who were actively looking for jobs stopped. Statistics SA calls them discouraged work-seekers and the number increased to 2.9 million in Q2 2018.

Ramaphosa is hoping the economic stimulus will spur growth, improve job creation and reduce inequality, which has been persistent and increasing for the last 24 years. He says progress will be measured by the growth generated in the economy. Other agencies will also monitor the implementation of the stimulus programme.