- Multiple proposals have been put together brainstorming ways for South Africa to recover post-Covid-19.
- A great deal of foundational work was already done before the pandemic.
- In order to build trust and restore confidence, it’s time for the strongest elements of these strategies to work together and complement each other, says Bonang Mohale.
South Africa entered this pandemic at our weakest. The economy was already devastated by us.
Twenty-six years into democracy, we have squandered both our social and political capital. What is needed now, more than ever, is an integrated national effort by all South Africans to re-establish a sense of greater good.
It might be more useful to focus on those things that are common among us than on those where we might differ.
A handful of proposals
Policy documents that have been launched recently – all geared towards the country’s urgent socio-economic recovery – include National Treasury’s Towards an Economic Strategy for South Africa and the Supplementary Budget; The Economic Transformation Committee of the ANC’s Reconstruction, Growth and Transformation: Building a New, Inclusive Economy and Business for South Africa (B4SA)’s A New Inclusive Economic Future for South Africa: Delivering an Accelerated Economic Recovery Strategy.
Comparing and contrasting these with the country’s national economic vision, NDP 2030, it is heartening that both our challenges and the requisite solutions are very well understood and articulated.
After a truly intensive piece of work that took time with highly accomplished experts, the 18 July 2011 NDP 2030 correctly diagnosed our nine challenges and proffered excellent solutions: too few South Africans in work; the quality of school education for most black people is sub-standard; poorly located and inadequate infrastructure limits social inclusion and faster economic growth; spatial challenges continue to marginalise the poor; South Africa’s growth path is highly resource-intensive and hence unsustainable; the ailing public health system confronts a massive disease burden; the performance of the public service is uneven; corruption undermines state legitimacy and service delivery; and, as a result, South Africa remains a divided society.
A firm policy basis has been laid by Towards an Economic Strategy for South Africa, which was considered by Cabinet and accepted last year. While some of the measures have been delayed by the virus, the country is now ready.
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Deputy Minister David Masondo will coordinate implementation as the head of the Vulindlela office. Minister of Finance Tito Mboweni successfully walked the tightrope by weaving a clear silver thread from the supplementary Budget to The Medium-Term Expenditure Framework and the Medium-Term Budget Policy Statement.
Budget interventions
But the outbreak of Covid-19 and the national lockdown has resulted in the largest economic contraction in 90 years as well as a loss of millions of jobs.
Mboweni delivered a Supplementary Budget as a roadmap to stabilise debt by creating a foundation for economic revival while forging a new economy in a new global reality.
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Compared to the February Budget, Gross Tax Revenue has declined from R1.43 trillion to R1.12 trillion; the Budget Deficit has increased from R370.5 billion to R761.7 billion and Gross National Debt has increased from R3.56 trillion to R4 trillion.
The Minister advanced six major solutions.
On taxes: The country is R35.3 billion behind on the Revenue Collection target which means that we will miss our target for the year by R300 billion.
On economic relief measures: Government has worked closely with the private sector, labour, the Central Bank and the public, by implementing relief measures through the Solidarity Fund, Covid-19 grants, and the Loan Guarantee Scheme.
On zero-based budgeting: The Budget initially has no amounts set aside for any government department. This will help prevent “irregular, fruitless and wasteful” expenditure, as each department will be given the funds they have proven as essential, once scrutinised by the Minister.
Concerning Covid-19 health and frontline services: Government has identified 400 quarantine sites with a capacity of 36 000 beds across the country and deployed nearly 50 000 community health care workers to screen 1.3 million citizens to date. Tariffs have been agreed with private sector hospitals to supplement public sector capacity.
On our post-lockdown future: Infrastructure will be how we grow the economy. A total of 177 infrastructure projects across the public and private sectors have been considered at the Sustainable Infrastructure Development Symposium, with the Government already having committed R100 billion over ten years towards the Infrastructure Fund.
As for unemployment: This is our single biggest challenge. As of mid-June, the Unemployment Insurance Fund (UIF) has provided R23 billion in Covid-19 relief to over 4.7 million workers affected by the pandemic. R6.1 billion is allocated and a further R19.6 billion has been set aside for the president’s job creation and protection initiative, which will include the repurposed public engagement programme and a Presidential Youth Employment Intervention.
Building an inclusive economy
The Economic Transformation Committee of the ANC has developed their framework for reconstruction, growth and transformation, with the goal of building new, inclusive economy.
It also starts by correctly identifying that the Covid-19 pandemic continues to impact negatively on economic activity in South Africa and around the world – unemployment is rising, businesses are under pressure and public finances are being stretched. South Africa’s legacy of underdevelopment and the country’s ongoing realities of poverty and racial and gender inequality are once again being exposed for all to see.
The first pillar of the new policy framework is to mobilise society around an infrastructure-led recovery with new investments in energy; water and sanitation; roads and bridges; human settlements, health and education; digital infrastructure and public transport. To achieve significant job creation multipliers, the emphasis will be on localisation, including maximising the use of South African materials and construction companies as well as labour-intensive methods.
While it is an urgent priority that state capacity to plan and monitor the execution of infrastructure projects should be strengthened, there will also need to be expanded use of public-private partnerships (PPPs), including build, operate and transfer project delivery methods. The establishment of an Infrastructure Development Agency in the Presidency will play a useful role in complementing the pockets of excellence that currently exist within the State and State-Owned Enterprises/Companies (SoEs/Cs) regarding project management capabilities.
Accelerating recovery
B4SA’s A New Inclusive Economic Future for South Africa: Delivering an Accelerated Economic Recovery Strategy also starts by observing that a coherent economic recovery strategy, which is clearly articulated as well as competently and efficiently implemented and led with visible urgency, will enable a new narrative to be established about South Africa’s macro-economic potential and in so doing improve confidence, investment, inclusive growth and unemployment levels.
The work prioritises 12 key initiatives, from a list of over 50, some of which can be launched immediately, across 11 high-impact sectors. B4SA has also identified 12 initiatives, secure and affordable electricity supply; fast-track green economy; implement Transnet’s ‘Road to Rail Strategy’; ports expansion; road infrastructure; full spectrum utilisation; e-learning and digital health platforms; e-commerce acceleration; water infrastructure; maximise commercial agricultural output; import replacement focus and increased financial inclusion and lower cost of capital.
For each of these high-impact areas, B4SA has considered the critical enablers and success factors which are prerequisites for activating employment and reducing poverty and inequality.
The following themes have been identified as priorities, policy consistency; regulatory reform; addressing crime, corruption and undoing state capture; infrastructure investment; SoE/Cs restructuring, optimisation or exit; energy industrialisation strategy; economic transformation and B-BBEE; addressing skills shortages and investing for modernisation.
A recurring conclusion across most sectors is that infrastructure is a key enabler which must be addressed with urgency if businesses are to deliver inclusive growth. A constructive, effective policy framework is required to support and sustain growth.
What needs to be done?
Strategy is simply defined as how to compete! We compete at a country, business and individual level. We need a committed leadership willing to make difficult, though sometimes unpalatable choices focused on appropriate policies, which enable investment and inclusive Socio-Economic growth. A leadership that can rise above its immediate interest, because to truly act in our own interest, we must first act in the best interest of others.
We need to have consensus, especially on the economy by all social partners, devoid of factional and ideological self-interests and no resource contestation. We need a more socially conscious business and flexible labour. We need a National Economic Development and Labour Council that will deliver a social and economic compact of a shared, compelling, coherent, clear, crisp, concise and precise national vision, not just a bargaining chamber.
We need to harness the pockets of excellence in the public sector together with the huge managerial capacity in the private sector. We still urgently need far-reaching structural economic reforms AND fiscal austerity. We must unlock the township title deeds on land; effectively and efficiently implement the R500-billion Covid-19 economic stimulus package; charge the top state capture miscreants; eliminate R32 billion in ‘irregular, fruitless & wasteful expenditure’; deal decisively with the R450 billion Eskom debt and the R128 billion cumulative bailouts; and grow GDP by a minimum 4%.
Otherwise, we are standing still (with interest rates at about 8% and CPI about 4%).
Furthermore: auction the 5G spectrum; re-activate the next round of renewable energy; fast track infrastructure PPPs broadly; restore the effective tax collection capacity lost in the ‘nine wasted years’; expand the tax base; clamp down hard on tax evasion; reduce the deficit to zero (preferably quickly move into surplus); sell some non-core assets; and dramatically cut/eliminate red tape.
We should only seriously consider increasing the tax rate as the absolute last resort – before we kill the goose that lays the golden eggs.
Bonang Mohale is the Chancellor of the University of the Free State, Professor of Practice in the Johannesburg Business School (JBS) College of Business and Economics. He is the author of the best selling book, Lift As You Rise. Views expressed are his own.
