The first phase of the government’s recovery programme will see it go for quick wins that will generate investor confidence, says Business Unity South Africa (Busa) CEO Cas Coovadia.
Covid-19 has taken a heavy toll on the economy and the government, along with the private sector, has been working hard to come up with ways to address the fallout of this crisis.
This has seen the state, civil society and organised business and labour come up with a so-called recovery action plan in the National Economic Development and Labour Council (Nedlac). The goal of these efforts is to cement investor confidence by pushing through ‘shovel ready’ projects, which will have a noticeable economic impact.
The plan has been presented to President Cyril Ramaphosa but is yet to be made public.
Coovadia says the negotiations saw the participation of at least four ministers, the top leadership of Busa and the secretary generals of National Council of Trade Unions, the Federation of Unions of SA and the Congress of South African Trade Unions.
“It was at a high level. It was taken very seriously. We put in a lot of hours in getting the document together,” Coovadia says.
He adds that the country’s largest economic actors understood the scale of the Covid-19 crisis, and appreciated the need for quick action. “It is very significant that all social parties have agreed to what the critical implementables are in the short-term.”
Although there was buy-in from all participants, Coovadia was hesitant to call what they put together a ‘plan’. “The document has been touted as an economic plan, but what it actually is, is a series of short-term implementables that government can implement almost immediately.”
It will not require new legislation or policies and largely just needs the government to implement programmes it has already agreed to, like the allocation of high-value radio spectrum and giving the go-ahead to expanding the number of independent renewable power producers.
Nedlac executive director Lisa Seftel pointed out that much of what has been proposed was drawn from the 2018 Job Summit and will be implementable within six months.
The document, as Coovadia calls it, is just the first phase of putting what Ramaphosa says is putting in place a new socio-economic compact. The president sees the Covid-19 crisis as an opportunity to restructure the SA economy in a way that brings more people into it.
Even prior to the Covid-19 crisis SA’s economy was stagnating. It had just gone into recession and unemployment was stuck at about 30%.
Finance Minister Tito Mboweni also sees the crisis as a moment to push through much-needed economic reforms.
Seftel points out that such a compact will not be a once-off creation by the participants in the negotiations, but something that will continuously be worked on.
“The social compact is both a noun and a verb. It’s something the plan addresses but it’s also something that will continue to be worked on.”
Coovadia makes the point that though all the major economic actors agree that a such a compact is a move in the right direction, he says the state should not hesitate in taking the lead. “A compact should not be seen as something that takes the lead on decisions; the government needs to take decisions on implementation.”
The government must not be afraid to disappoint some constituencies when it comes to implementing long-awaited economic changes, he says.
“We will see the compact as a mechanism to consult with critical stakeholders, but not necessarily to look for consensus on every issue.”
He says to bring about such a new compact, the government still has to face up to the fiscal challenge. “This is where some of the tough discussions will happen.”
The challenges Coovadia speaks of are stark. Mboweni pointed this out in his supplemental budget that if the country did not get its spending under control, it would not be able to service its debt.