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Economic recovery plan explained: Five things you need to know

The country’s governing party concluded its two day long lekgotla on Monday, and the economy was at the top of the agenda. The lekgotla brings together alliance partners (Cosatu skipped this one for the first time) and ANC deployees in national, provincial and local government spheres. Members of civil society and the business community are invited too. This year’s lekgotla was also attended by former presidents Thabo Mbeki and Kgalema Motlanthe. (Former president Jacob Zuma was notably absent from the list of attending former heads of state… probably too busy preparing his avoidance strategy for when he is supposed to appear at the Zondo Commission of inquiry this Friday). 

But the guest list wasn’t the only reason that this lekgotla was a pretty big deal. It comes as the government is trying to find a way to rescue the economy. So the key focus was to develop policies to rebuild the economy after the devastating effects of Covid-19. 

To recap: 

  • South Africa’s economy contracted by 51% year-on-year in the second quarter of this year, and that’s thanks to the hard lockdown. Following this announcement, the South African Reserve Bank forecast that the country’s gross domestic product (GDP) will contract by 8.2% in 2020 from the 7.3% contraction it predicted in July. But it did say it expects the economy to recover a bit in the third and fourth quarters. (The GDP is the total amount of goods and services that a country produces in a year.)
  • The latest employment statistics released by Statistics South Africa last week show that at least 2 million lost their jobs in the second quarter of the year, and hundreds of thousands simply stopped looking for jobs. As we explained in this article, South Africa’s unemployment rate is 42%. 
  • Then there are the hundreds of small, medium and micro enterprises (SMME) that had to close their businesses, either temporarily or permanently because of the virus. (Many were able to survive thanks to government’s SMME Covid-19 relief fund, thankfully.) 

You get the picture. That’s why the ANC used the lekgotla to tackle a new economic plan. It also discussed other pressing issues like corruption within the ANC, combating gender-based violence as well as gender inequality, and stabilising South Africa’s soaring debt. (But that’s an explainer for another day.)

So, let’s see what President Cyril Ramaphosa had to say when he announced the lekgotla’s outcomes on Monday night, and explore what this means for you. 

1. What was the biggest takeaway from the lekgotla? 

The ANC (and government) plans to tackle the economic issues facing the country by investing in lots and lots of infrastructure development. That means building roads, bridges, houses, you name it. The party outlined seven key areas that it intends targeting with infrastructure development: 

  • Energy 
  • Water and sanitation
  • Public transport 
  • Road and bridges 
  • Human settlements 
  • Health and education
  • Digital infrastructure 

2. That’s a long list of things. How does the ANC plan to accomplish this? 

In his over-30 minute address on Monday, President Ramaphosa said the government would be taking a phased approach to economic recovery, considering the greater impact the coronavirus had on the economy. In that context, this is the third phase of the recovery plan. The first phase of the economic recovery plan was to ‘save lives’ amid Covid-19 with a robust healthcare response. The second was to ‘save livelihoods’ through the financial support provided for businesses and households through the grant system, and now this infrastructure-led approach, which is focused on reconstruction and recovery. 

Also on Monday, Ramaphosa said the ANC will work with social partners to guide the work of the government to generate higher rates of economic growth, investment and job creation. Speaking of social partners … the plan looks a lot like a similar one agreed to by trade unions, business and government at the National Economic Development Labour Council. Read more about that here. He also emphasised the inclusion of women and youth in this recovery plan. 

“Our aim is to radically transform our society to make it truly non-racial, non-sexist and economically more inclusive”, he said. 

Ramaphosa said a criteria and timeline (which will be announced in the near future) was developed to guide the ANC in its strengthening of the key focus areas, others of which include: localisation through industrialisation, energy security, food security, support for tourism, the green and blue economy (marine life), public employment programmes and macro-economic policy interventions. 

3. So, what’s the plan, exactly? 

The foundation of the plan is to improve South Africa’s infrastructure so the economy can work like a well-oiled machine bringing in money, investment and creating the jobs we SOOO desperately need. Ramaphosa said the programme will transform the structure of the economy while recognising the role SMMEs play in job creation, especially for youth entering the labour force. He plans to do this through LOCALISATION. 

Localisation means supporting South African companies, from construction companies, to building materials as well as skills and labour-intensive methods. In other words, we’d have South Africans building South Africa. (Note: we must stress that is not meant in the xenophobic sense. This means that local companies will be used, but it does not exclude our friends from other countries, especially in the rest of Africa, from participating in our economy.)

Oh, and when we say green, we don’t just mean agriculture and food security, but also the other green goodies: cannabis and hemp. Nedlac’s draft economic recovery plan announced in September touched on the involvement of growth industries in the digital economy, agriculture and agro-processing, hemp and cannabis (for industrial and medicinal use) sectors as well as the support of green jobs, probably in the energy sector, the Daily Maverick reported. 

4. What about housing and sanitation? 

Yes, that is on the agenda, as outlined above. South Africa has a pretty big housing backlog, and we know there are backlogs when it comes to access to water, especially in rural areas. Remember how the minister of human settlements and sanitation, Lindiwe Sisulu scrambled to get water tankers delivered in rural areas at the onset of the pandemic? 

Linked to this is the need to support urban and rural renewal, Ramaphosa said. He said a significant portion of the proposed infrastructure programme should be directed towards municipalities, and that a variety of funding, including from government and the private sector, should be channelled towards this. 

“Rural roads and water services should be upgraded with a bias towards the use of local labour and labour-intensive methods. Attention should also be paid to the revitalisation of inner cities and townships…” he said.

5. Where does the government plan to get the money to do all this? 

The lekgotla’s outcomes were pretty thin on the budget and timelines, but the President is expected to announce more details in a separate budget in the coming days. But, we can see that investment from the international community is big on the agenda. And we also won’t blame you if you’re not ECSTATIC about this new programme, as there were many before this one and the progress was not super evident. (You have to look really hard to find out what happened to all of those plans).

But if the President manages to get corruption, crime, anti-competitive behaviour and social issues like gender-based violence under control, South Africa might just get it right this time. And we HAVE seen action on the anti-corruption drive, with the recent high-profile arrests and accountability sagas (Read more in our explainer on the state capture arrests here).  

“Part of the social compact must ensure that as a society, we take a firm stand against these kinds of practices, and their impact on consumers, business, communities and the economy. The work that is being done by law enforcement agencies at the moment is commendable and we reaffirm that we must leave no stone unturned in dealing with crime and corruption,” he said. 

Key to seeing the plan through will be buy-in from society, and Ramaphosa also said we have to work together and support each other to implement the plans.