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Ramaphosa: Economic turnaround requires urgency but will not be quick

President addresses National Assembly in his first Q&A since taking office.

As the country battles with economic and unemployment crises, President Cyril Ramaphosa says that while the government needs to work faster to tackle these challenges, the various interventions the state has implemented since last year will not provide results overnight.

Ramaphosa made these comments at the sixth democratic parliament’s first question and answer session, where he addressed issues surrounding the country’s economic outlook and the funding of his CR17 presidential campaign within the African National Congress (ANC).

At the start of his address to the National Assembly, Ramaphosa acknowledged that it has been almost a year since he announced the economic stimulus recovery plan – which involves reprioritising R50 billion from non-performing portfolios to provide jobs – in September 2018. 

At the time, the country was in a technical recession following a contraction in its gross domestic product (GDP) for the first two quarters of the year. The unemployment rate was sitting at 27%.

A year later, South Africa’s GDP has contracted by 3.2%, the largest decline since the financial crisis, and the unemployment rate has increased to 29%. 

No quick fixes

“There are no easy or quick solutions to low growth and unemployment,” said Ramaphosa.

The president said the economic stimulus package announced last year is unlike the typical stimulus packages implemented in other countries that have “a lot money to pump into the economy to stimulate activity, growth and demand”. Instead, it has “South African characteristics”. 

The South African stimulus involves reprioritising government spending and coming up with measures to attract investment, interventions that “by their very nature take time to gain traction,” said Ramaphosa. He added that this will require hard work, smart policy choices and cooperation among social partners. 

The biggest risk to the economy

Ramaphosa said that the country’s unemployment levels are “unacceptably high” and that the state has identified the levels of joblessness, especially among young people, as “the biggest risk to our economy”. 

In July, Statistics South Africa’s second-quarter unemployment figures revealed that youth unemployment is 56.4%, with Statistician-General Risenga Maluleke remarking that irrespective of their levels of education, young people were the most vulnerable to labour markets. 

Read: Evidence that shows Ramaphosa has a jobless crisis in SA

Ramaphosa said that government is moving forward with various interventions, making specific mention of the Youth Employment Service, a business-led initiative aimed at creating one million work experience opportunities for young people.

“That is gaining traction,” he said. 

He added that the Jobs Summit interventions that government, business, civil society and labour agreed to last year are also being implemented. 

The Jobs Summit framework agreement, which outlines what needs to be done to tackle joblessness, hit a snag when it was overshadowed by the May elections. Last month the stakeholders were prodded to recommit to fast-tracking the resolutions by the recent increase in the unemployment statistics. 

Read: Not much to show from commitments made at Jobs Summit

“We have set up a programme management office in the Presidency to focus specifically on the issue of youth unemployment and we believe that we will be able to address it effectively,” he said. 

Investments 

A key part of this will be creating a conducive environment to attract investments in the country. Ramaphosa indicated that there are early indications that a number of global and domestic investors are interested in placing investments in the country. 

One of the measures he listed is a relook at the visa regime – not only to attract more tourists, but also highly skilled professionals.

Read: Tourism could reboot SA in no time at all; it’s time it was allowed to

The Department of Home Affairs recently issued a list of countries that will not need visas to visit South Africa such as Saudi Arabia and Qatar.

Read: Ramaphosa is said to ease Visa rules to boost tourism

“We are working on a set of priority reforms to improve the ease of doing business and reduce the cost of compliance,” said Ramaphosa. “Already there has been a significant turnaround in flows of foreign direct investment, surging from R26.8 billion in 2017 to R70.7 billion in 2018,” he added. 

The investment conference will take place in November. Last year R300 billion was committed in investments, with R250 billion worth of projects currently being implemented.

Ramaphosa said measures to reduce the fiscal deficit and debt ratios will be announced in October when finance minister Tito Mboweni tables the mid-term budget policy statement. 

In February, National Treasury projected a deficit of 4.5% in 2019/2020, but rating agency Moody’s reported that this may have increased to 5.7% after government released additional money for the Eskom bailout and low tax revenues.

“We have embarked on a journey and it will become clearer as we move on in the next three months,” said Ramaphosa. 

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COMMENTS   31

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Oh boy, speed is not the strong suit of the ANC, unless you’re talking about looting speed.

Here they have no equals.

When it comes to building something positive, well, we’re still thinking of a plan, or we’ve got a plan with 9 or 13 points.

But we can’t remember what they are.

Netwerk24 is reporting that the president came close to admitting they’re going to target pension funds. Get your money out of RAs now and minimize your company pension contribution percentage, unless you fancy eating cat food when you’re 70.

He basically came close to admitting that to equalize society the middle class will be brought down to the same level as the poorest of the poor.

This lot has no idea of how to pick the poorest of the poor up to middle class level.

All they are good at is steal. The middle class will pay.

mmmm..I also feel like you…run…but what then. Maybe we will be in bigger trouble if they do not start prescribed assets. Prescribed assets might yield 10%…Eskom then has zero debt..no downgrade…stronger ZAR..SA shares rally and your RA shows strong growth….

….getting money out of RA’s (or from Preserver or Pension/Provident funds) not that easy as pressing a button:

RA Funds….have to wait until 55-age to make retirement withdrawal (then only if fund value is below R247K then you can withdraw whole fund, after tax). Otherwise after 55, only able to get access to 1/3 now (while 2/3 will go into prescribed asset living annuity)

If you are already on pension (post 55 age), you cannot withdraw the whole fund. (One can drawdown the max 17,5% rate, by depleting the fund over short period of time and invest excess abroad, but paying higher income tax on withdrawals)

Section 14 transfers (as far as I know) cannot be transferred to offshore ret fund structures (…if it was possible, it WOULD’VE been PERFECT escape route 🙂

Re Employer fund (i.e. if still working fulltime), you’d have to resign from your employer, in order to withdraw the fund in cash (but subject to the higher tax SARS-table, where the 1st R25K exempt). Resigning from fixed employment & then asked to be re-appointed, carry its own risks.

Obviously one can do with your “discretionary” investments whatever you like.

The only feasible option here is to make the best of the bad situation…by ceasing contributions to your RA Fund (and lose tax deduction), and re-channel savings direct abroad.

(Direct offshore preferred, as prescribed assets will in the end, reach all ETFs, tax free savings…irrespective what local Rand-hedge fund you’ve chosen. If fund is domiciled in SA, a % will have to go to prescribed assets, before the fund can invest the rest into chosen fund-choice).

I think, a “revolution” could happen in the employee/employer space, where employees will have to start presurising management to consider ceasing corporate retirement schemes (only continue with the risk part, i.e. death & disability cover), and “resign” all the employees, cash out all employees fund values (pay the tax) and re-appoint them in same position. Will be HR-admin nightmare, but only option to “get RA funds out”.

Or just cease the corporate fund contributions, by a termination instruction to the asset manager, requiring an amendment of fund rules(?) Then employee will be responsible for their own ret provision in private, and not locked into Reg-28.

Expect life fund & asset manager’s shares to fall steeply, as business is lost.

If over 55 what about transferring everything to a owner managed 100% offshore living annuity. I read about it somewhere?

@Mmmmm.

Thanks. Have tried to find something on google, and (surprizingly) Sable International may have something that could help….but it’s on;y for persons already living abroad as non-residents (as Emigration tax clearance, along with Financial Emigration/MP336 could be a requirement). You then simply pay tax on the fund abroad, via asset swop.

But if we remain in SA as tax-residents, this route would be possible.

(Apologies, an error on my side: post-retirement living annuities are not subject to Reg-28, as you can invest 100% in a foreign fund choice…but it will still be subject to prescribed assets, as the annuity product is domiciled in SA, subject to changes in SA fund legislation)

My opinion, is to get most of your discretionary savings (at least) directly offshore. It is a topic fro another day, as it would be sensible to set up a Last Will & Testament in the foreign country, and need to be aware of foreign Inheritance & Estate Duty tax applicable to foreign jurisdition…which could be higher as in SA. Hence tax haven/low-tax countries would make sense)

Exactly what i’m doing.. I can’t withdraw from a RA, so reduced contributions and will end it next month as many of these RAs have rules on ending it too i.e. u can only move to preservation funds.

While you get a tax hit on income, will take tax deducted funds into a investment outside of SA once global recession happens(It’s coming in 3-9months). Also planning on leaving SA permanently as a result of it all as this, prescribed assets, along with NHI and no repercussions for those guilty of fraud and corruption mean it’s just not worth it to remain in SA.

I have a Liberty annuity. Can that be in trouble?

@michael.if my annuity fund is below R247k when im 55, do i get all that money immediately? Is there taxes to be paid?.

This communist regime and our saviour, Cyril, does not support SA’s best interests.

@QO1942. Many people forget, CR was selected as leader to mend a fracturing ANC-party….first and foremost.
SA’s economic interests, coming a distant second (some will say it’s purely coincidental for the country as a whole to benefit from new ANC leadership)

Really Cyril? Still scratching your head? And then, when you have squandered everyone’s pension, what do you steal next?

And yet it has not occurred to you that a few changes to the labour law can generate more business and more taxes than what your corrupt government can expropriate.

I think the private sector have already lost ALL confidence in CRANC

According to news24 CR said:

“In South Africa, we are confronting severe inequality, where around R250 billion is spent on the 16% of the population who have access to private health care, while only R220 billion goes towards health care for the rest of the population”

The R250b is not spent on them, they are paying through their teeth for this and barely hanging in there due to mismanagement of the economy by the ANC.

It is interesting that he and the NHI supporters come out with this arguments but they never say that everybody, including ANC politicians, should have the same housing and education too. Anyway, nowhere in the world do people have the same access to health services. Does anybody believe that in countries with very good NHI system, like Canada and Sweden, the prime minister gets treated the same way as an unemployed drug user? Can you imagine the Canadian PM sitting in his GP’s waiting room with other people? So, where do you draw the line? At ministers, deputy ministers, local mayors, city councillors? BTW, in Canada the average waiting time to see a specialist is several months and because private health services are not allowed rich Canadians pop over to the US and pay for immediate treatment.

I noticed how he mentioned that Japan is pushing SA in this direction.

Please see in the link below what trouble Japan has with especially foreigners using their NHI for free.

Keep in mind that this is a first world country with very low corruption levels and the people running it is HIGHLY intelligent and they have a home affairs department that works. They also don’t have a similar foreign invader problem as we experience in SA.

After looking at that and considering that it is only one of hundreds of problems expected with NHI. Can you honestly say NHI in SA will be a success? Come on man.

https://japan-forward.com/japan-moves-to-stop-foreigners-abuse-of-national-health-insurance-system/

Spot on, Hun. Using this convoluted argument CR uses, there should also not be business class on planes and everyone should drive a Toyota .. while politicos rush round in convoys of BMW and Mercedes, and fly up front almost without exception. It’s a putrid crock dished up for gullible sheeple. What I don’t get is all the policies in post -colonial Africa are the same and the outcomes are the same .. abject misery, hunger and declining standards of living. You use the same recipe over and over and expect a different outcome. You take from those who have, give to those who don’t (but vote for you) and in the end everyone ends up with nothing … except the politicians. They are always OK.. they look out for themselves. Hartseer maar waar.

The more governments “intervene” (read: interfere) the more problems we have. Not just in SA, but especially in SA…
From government intervening we got State Capture, now we’re supposed to believe that these interventions will be positive? I expect politicians to lie like I expect a bee which stung me to die….

what is this guy smoking ? i’ve heard the jse is losing billions of foreign cash.
during his speech he refused to answer direct questions from the DA.
tata zonki is his mantra until those left have to eat rats

Mr President, the “economic turnaround” will be confirmed by Moody’s placing SA on negative watch after their next review!

The ANC is unable to action “real” economic reforms (we all know what those are), but it will come at a cost where ANC will be voted out of power.

*lol* the words “urgency, but will not be quick” reminds me of a saying in 4X4 driving circles:
You need to drive over terrain “As Slow as Possible, but as Fast as Necessary” 😉

Leaving such off-road driving to the ANC, vehicle-SA will end up down the fiscal cliff!!

With reference to getting funds out of RA above.

Thanks for the investigation. I will definitely do some more research on this. One never knows a 181 day holiday in Mauritius or the Bahamas might pay for itself through lower tax?

There will be no economic turnaround and this is why: 6.7 million adults are unemployed. That number will increase consistently for the next two decades as new adults enter the job market, find no work and companies keep cutting their workforce. That will increase crime exponentially because people have to eat and feed their many children. Crime will drive both tourists and skilled workers away from South Africa (as it is already doing).

The ANC will always be corrupt. That is simply the nature of the beast. Corruption at the very top is what the media is focussing on, but it is rampant in every single smaller municipality. The power grid is collapsing and cannot be saved. This is a known issue, however there is a silent cancer and that is the ailing infrastructure that is causing many a small towns to become inhospitable = more unemployment. A national water crisis looms for a few reasons – water scarcity, poor management of water infrastructure, corporate chemical pollution and water that has been poisoned with sewage.

Tax revenue is in rapid decline for a number of reasons, but is an indicator of a failing economy. The only way that the government has created jobs thus far is by over-inflating the SOE’s with people who lack the requisite skills. The average salary at Eskom is R500K per annum. This is not sustainable so there will literally be no more job creation, but more job losses. Voter employment is the only reason why the ANC hold onto SOE’s so aggressively – because they know that if they are privatised, the only turnaround strategy for all of them will be massive redundancies = angry voters. Most private institutions are under cost pressure and are turning to technology and engaging through smart phones – the bank branch is a dying breed for example = unemployment. I could go on.

The SA economy cannot and will not be turned around in the traditional sense. SA will eventually become a country not dissimilar to Nigeria. It will be seriously over-populated, most people will be poverty stricken, but there will be opportunity for the corrupt and the hard-core businessmen who know how to work the system, milk it, make their money and get out. The ANC will be reporting directly into the Chinese and Russians if they are not already.

“There are no easy or quick solutions to low growth and unemployment,” said Ramaphosa.

Yes there are. Call a national press conference immediately and say the following:

1. There should be no confusion about private property rights. It is a key building block for growth and the government will respect that. No expropriation without compensation will ever happen.

2. State owned entities will be privatised as soon as possible. The private sector is the jobs engine and is more efficient to deliver these services. The NHI will not happen. Pension funds are safe.

3. The labour law will be amended immediately to favour employers and not employees. Getting rid of non-performing employees will be made easier, and appointing based on merit only will be encouraged.

4. BBBEE will be cancelled. Best person for the job. Always.

5. No minimum wage will be implemented.

Watch how investment flows into South Africa and see the growth and jobs number improve within a few months.

“The Dark Horse” you have summarised SA’s future perfectly.
Couldn’t have said it better.
Should be a stark warning to everyone still here.
If you’re not one of those ‘hard-core businessmen’ as bluntly put by The Dark Horse or tired of being vigilant you need to make a concerted effort of getting out NOW!
Very sad state of affairs I’m afraid…SOS

See how the ANC has watered down accountability – President CR is only answering (pre-set) questions once a quarter.

The British prime minister has to answer questions in the House of Commons every day – and no pre-set questions.

Economic improvement takes time but there is no sense of crisis or urgency amongst senior government officials to see. They are resting on their 57%.

So no mention of when the “bullet train” and the “smart city” will come on stream then? Nor Zuma’s 5 million jobs, nor Mbeki’s African Union?

“So little done, so much to do.” … Cecil Rhodes’ quote was way more prescient than he would ever have thought. . . ….

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