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.
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.
“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.
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.
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.
“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.