[*PARTNER CONTENT] An interesting survey showed that while the rest of the world has identified Covid-19 as the biggest problem facing them in their respective countries since April 2020, in the last couple of months, South Africans have instead opted to identify rising unemployment, corruption and crime and violence, as top three concerns instead, with Covid-19 placing fifth on the list after poverty and social inequality.
This is telling and truly indicative of the general feeling of worry that South Africans have about the state of the economy amid a global pandemic that continues to claim hundreds of thousands of lives, monthly.
On the one hand, South Africans need to continue being prudent with their spending habits and the financial concessions they make. The current trend to consult store catalogues such as the Makro catalogue for specials and weekly savings pronouncements before venturing out to shop for groceries and other household needs is on the rise globally. These individual habits have helped people manage what is left of their significantly reduced disposable income.
On the other hand, measures have been announced on the part of the presidency on how the government plans to go about mitigating the effects that the pandemic has had on the South African economy. Below are a few key highlights on the actions that will be taken to bolster the failing economy as enclosed in the South African Economic Recovery Plan.
1. Infrastructure & employment interventions
An aggressive investment in infrastructure through public-private partnership forms the core of President Ramaphosa’s government plan. In this regard, priority sectors will be the first beneficiaries of an infrastructural expansion are the freight and public transportation industries.
Over a 10-year period, the current South African government intends to achieve a 3% GDP growth on average over the course of the next decade. More demand-led skills training, the absorption of 20 000 learners for artisanal programmes and an investment of R100 billion all form part of the economic recovery plan with respect to addressing issues of employment.
2. Tourism & the digital economy
Although there is a heavy focus on local industrialization and plans to look a lot more inwardly in steering the economy out of recession, the tourism industry is recognised in the document as one of the hardest hit by the pandemic and as such one of the most critically in need of recovery efforts.
SMMEs are identified as instrumental to reviving the tourism industry and as such will benefit greatly from the establishment of the Tourism Relief Fund and the Tour Guide Fund to be set-up by the government. The tourism sector will also be prevented from collapse by supporting the cultural and creative industries to develop local digital content.
The digital economy is further recognised as being instrumental to enable increased economic activities for South Africa. For its power to create and sustain both mainstream and unconventional jobs, the digital economy is set to receive a sizable investment in form of an Artificial Intelligence Institute which will expand capacity within the communication department as well in other sectors such as education and manufacturing sectors.
3. Reforms & sectoral interventions
Prior to the global pandemic, a low ease of doing business ranking features as a huge impediment to attracting foreign investment. It also discourages locals from setting up businesses and firms in home countries. Although South Africa ranks higher than many African countries on the World Bank Ease of Doing Business Index, there are still several critical areas that are especially more vulnerable due to the pandemic.
The economic recovery plan has correctly identified the need to reform current regulatory processes as well as the importance of acting fast to tighten any loose areas that might facilitate bottlenecks, in turn increasing the cost of doing business in South Africa.
With respect to sectoral interventions, the plans include creating 317 000 new jobs and financially supporting farmers whose business have been adversely affected by the pandemic. Similarly, the current energy crisis is a huge concern for both government and private stakeholders. An increased focus on diversification and partnerships as the right intervention approach in dealing with the crisis currently plaguing the energy sector describes the general approach the government has chosen to take.
The South African economy sharply regressed into a recession in the third quarter of 2019, this has now necessitated a recovery plan, instead of, say, a strengthening or intensification of economic growth plan. Hence, the tone of the economic recovery plan follows that of the government’s desire to “build a new, inclusive economy” as written in the document. The government has a lot of work cut out for them, however, a clear and directed economic recovery plan is a good foundation in mapping the way forward.
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