/ 10 August 2018

R48bn needed for Ramaphosa’s stimulus packages

Job losses: The slowdown in the South African economy has had a crippling effect on unemployment
Job losses: The slowdown in the South African economy has had a crippling effect on unemployment, which is sitting at 27.2%. (Madelene Cronjé)

Finance Minister Nhlanhla Nene told the Cabinet lekgotla that the government will need about R48-billion to support the implementation of the stimulus packages aimed at boosting economic growth to create more jobs.

Data released by Statistics South Africa this week showing the economy’s crippling effect on the unemployment rate, which now stands at 27.2%.

The stimulus packages were announced by Cyril Ramaphosa last week.

READ MORE: What does Ramaphosa’s victory mean for South Africa’s economy?

Among other things, the packages will focus on increasing investments in public infrastructure, offering more support for small businesses, more localised procurement and more farmer support programmes.

The manufacturing sector had contracted in the second quarter, leaving 105 000 people unemployed during that period.

The mining sector threatened to add further to the unemployment figures with Impala Platinum announcing its plans to cut 13 000 jobs.

According to Stats SA’s quarterly labour force surveys, the number of people employed in the mining industry had dropped from 490 000 in 2005 to 190 000 at the beginning of this year.

Labour federation Cosatu has called on the government to use workers’ pension funds administered by the Public Investment Corporation (PIC) to take over some of the struggling mining shafts instead of closing them down.

Cosatu president Sdumo Dlamini said: “Yes, we have discussed that as Cosatu and we do support using the pension funds to save some of the mines but we have to be cautious.

“We have propagated for workers’ pension funds to be used as part of the stimulus, we are for that but we do not support a case where mines will prematurely announce retrenchments in the hope of getting the workers’ money …

READ MORE: Bombshell plan to lay off 30 000 public servants

“We can partner with people who are saying ‘this mine is going down, how do we work on retraining these workers using the pension funds’ investment?’” he said.

The agricultural sector had also suffered huge job losses, shedding 109 000 jobs in 2017, according to Stats SA figures. Most of the layoffs were attributed to drought and retrenchments in the chicken industry. A further 3 000 agricultural jobs were lost in the first and second quarters of this year.

One of the worst hit sectors — and among the first to benefit from government’s stimulus package — was sugar. Tariffs are being increased and government is distributing seed and fertilizer to farmers. 

Government insiders said discussions about agriculture dominated the lekgotla, which had conceptualised a collaborative effort it called the “agrarian revolution”.

“There is something called agrarian revolution that is underway and will include the departments of co-operative governance, agriculture and fisheries, land reform and small business development as well as trade and industry,” a senior official said.

“All of them will play a role. For example, you’d use co-operative governance to identify land, then agriculture would come with its tractors to come and remove bushes, then you get rural development to come and implement contractors and so on.”

Agriculture Minister Senzeni Zokwana agreed that greater co-ordination between national and provincial agriculture departments — and between other national ministries — was needed to ensure that projects were implemented and that assets, such as tractors, were properly utilised.

“According to projections, agriculture can grow, especially in the area of horticulture, provided we are able to do more work in terms of putting under production land that is lying idle in the homeland areas. There is work being done to co-ordinate that. We need to work more closely with land and rural development to ensure that the land which has been allocated to black farmers is under production,’’ Zokwana said.

Like Zokwana, Small Business Development Minister Lindiwe Zulu stressed the need for better planning, implementation and co-ordination, which she admitted had been weaknesses in the ANC-led government.

“We agree that [implementation] has always been one of the biggest challenges. We believe that monitoring and evaluation must be strengthened and let it not be some big animal sitting somewhere, let it be there in each and every department,” she said.

Her department is being targeted to create 90% of the 11-million new jobs government hopes to see by 2030, through the support of small- and medium-sized enterprises. The small business development department is expected to be one of the big beneficiaries of Ramaphosa’s stimulus packages.

Economist Iraj Abedian said the stimulus packages would not be an effective measure to undo the years of strain the South African economy had been subjected to. He said government could only cut costs up to a certain point and, beyond that, would need to find ways of attracting sustainable investment over a fixed period.

READ MORE: Transforming the economy critical for Ramaphosa’s dream team

“We are not in a cyclical downturn that a stimulus, or cutting interest rates, or cutting tax rate can fix. We are in a state that is the consequence of a structural hollowing out of the economy. And, therefore, a turnaround strategy required is not a stimulus package, but a turnaround three-year or five-year plan,” he said.

“There is no money in the fiscus but there is plenty of money in private capital both locally and internationally. Therefore, if you know you don’t have fiscal scope, you then structure your turnaround strategy based on a set of policies that will make each sector investment ready,” he added. — Additional reporting by Matuma Letsoalo