The ANC has failed in its response to the announcement of the technical recession and now is not the time for confusion, it is time for a decisive agenda to get economic reform going forward, according to Democratic Alliance (DA) leader Mmusi Maimane.
Maimane said that the DA has shown that it can grow the economy and create jobs where it governs despite constraints imposed by national government.
“Three-quarters of all jobs created in the past year were created in the DA-governed Western Cape, despite a crippling drought. That amounts to 123 000 new jobs created, while during that same period 124 000 jobs were destroyed in Gauteng, the country’s biggest provincial economy.”
Maimane was speaking at a media briefing on Monday where he presented the DA’s seven-point intervention plan to address the recession head on.
The DA says it knows that the economy will grow if the following seven interventions are implemented now:
- Scrapping of “reckless” policies such as the proposed nationalisation of the Reserve Bank and land expropriation without compensation which Maimane described as “undermining property rights”.
- Announcing the privatisation or part privatisation of state-owned enterprises such as South African Airways and splitting Eskom into separate power production and distribution businesses.
- Ending Eskom’s monopoly and allowing different cities to purchase directly from independent power producers, because “Eskom cannot hold us to ransom”.
- Introducing a fiscal austerity package aimed at cutting wasteful expenditure and stabilising national debt at 50% of gross domestic product.
- Cutting the size of President Cyril Ramaphosa’s “bloated” Cabinet down to around 15 ministries.
- Exempting small businesses employing fewer than 250 employees from complying with restrictive labour legislation.
- Immediately paying small businesses all outstanding invoices from national and provincial government
Maimane said the recession is not only a result of global economic conditions but is a “home-grown recession, borne of economic mismanagement and bad policy”.
“Petrol tax increases, VAT [value added taxes] increase, sugar tax, income tax increases — all of these decisions punish the poor and middle class and take more money away from hard working families.”
In a statement, the DA said that it’s plan will stimulate economic growth.
“A healthy, growing economy will be able to collect the taxes required to fund better education and healthcare systems, a compassionate welfare programme, effective land reform and restitution programmes, and an effective police service, trained, resourced and equipped to be able to maintain law and order and keep people safe.”
South Africa in a technical recession – the first since 2009
Statistics SA (Stats SA) announced last week that South Africa is in a technical recession, following the economy shrinking for a second consecutive quarter.
The second quarter of 2018 shrank by 0.7% quarter-on-quarter which followed a 2.6% contraction in the first quarter of the year.
A technical recession occurs after two consecutive quarters of negative growth.
The negative growth was led by the agriculture, forestry and fishing industry, which fell unexpectedly sharply by almost 30%.
The drought in the Western Cape and a severe hailstorm in Mpumalanga, which led to extensive crop damage, played a major role in the slowdown of agricultural production especially in the grain and oil seed production regions.
The other major declines were in the transport, storage and communication industry, which decreased by 4.9% quarter on quarter, and the trade, catering and accommodation industry, which decreased by 1.9%, according to StatsSA.
Household consumption expenditure, which contributes about two-thirds to economic growth, shrank by 1.3%.
This recession raises the possibility of a downgrade by credit ratings agency Moody’s which has already rated South Africa’s debt one notch above junk.
Government’s recovery plan
Treasury director general Dondo Mogajane told the Mail & Guardian last week that government was not sitting on its hands since the announcement of the technical recession and that there would be an economic cluster meeting on Tuesday that will look at finalising elements of the economic stimulus packages.
The packages were first proposed by the ANC at the end of July after Stats SA announced that the unemployment rate had risen from 26.7% to 27.2%.
A stimulus package is a collection of economic measures put together by a government to stimulate a struggling economy in order to strengthen it and prevent or reverse a recession.
Shortly after President Cyril Ramaphosa announced the stimulus packages, Finance Minister Nhlanhla Nene said government would need about R48-billion to support the implementation aimed at boosting economic growth to create more jobs.
The packages will focus on increasing investments in public infrastructure, offering more support for small businesses, more localised procurement and more farmer support programmes.