Gigaba unveils 14-point action plan to revive economy - as it happened

Gigaba unveils 14-point action plan to revive economy

Finance Minister Gigaba unveiled a 14-point action plan to revive the economy on Thursday.Gigaba announced the details of the inclusive growth economic action plan at the JSE, following engagements with various stakeholders.

GOVERNMENT’s INCLUSIVE GROWTH ACTION PLAN

Full speech by Finance Minister Malusi Gigaba

Following the release of Q1 2017 GDP data confirming an economic recession, the Minister of Finance has engaged with various stakeholders to map a way forward. It is acknowledged that failure to set the economy on a higher and more sustainable growth path will disadvantage a large portion of our population and undermine efforts to rapidly address unemployment, inequality and poverty. 

In our engagements with various stakeholders several major concerns were raised, amongst others:

- Continued slow growth, the recession and the potential impact on the fiscal framework;

- Rising government debt;

- The state of State Owned Companies (SOC) and risks to contingent liabilities; and

- Policy uncertainty and low business and consumer confidence. Government has been deeply engaged with the issue of low economic growth and the recession, analysing its impact on social welfare, and considering an appropriate response.

There have since been several engagements in Cabinet and amongst the Economic Cluster Ministers to craft an appropriate government response. 

The President hosted a meeting of several ministers on the 28th of June 2017. At the meeting, the President stressed the urgency of a coordinated response, and to this end an agreement was reached on implementation timelines for key structural reforms related to the nine point plan. 

These would support both business and consumer confidence thereby laying the foundation for an economic recovery. Details of the key areas are listed in the table attached. These interventions are the beginning of a response programme that will be unpacked in the MTBPS and the 2018 Budget.

The President will monitor and coordinate implementation to ensure these timelines are met. The Minister of Finance has also committed to exploring an economic support package within existing fiscal resources.

The support package will be designed to enhance the nine-point plan structural reform programme, and will depend on the government’s ability to find resources through reprioritisation from areas of slack towards areas with higher potential for growth and employment.

Any support package will be dependent on progress in implementing these interventions. At the medium-term budget policy statement (MTBPS) we will be able to more comprehensively speak to our economic outlook and growth prospects.

It is critical that we go into the MTBPS having demonstrated progress in unlocking growth. We’ve made progress on resolving electricity constraints, and improving labour relations and the ease of doing business.

The global economy presents opportunities, including growth in some of our major trading partners, a recovery in commodity prices, and strong capital inflows into emerging markets.  Let’s take advantage of these opportunities.

We also call upon all social partners to engage proactively on practical initiatives to bring about inclusive growth and economic transformation. We need all our collective leadership, initiative, imagination, and ingenuity.

Achieving the NDP’s Vision 2030 requires all of us to find common cause, for the sake of all South Africans.

Address by the Finance Minister Malusi Gigaba at the Reuters Economist of the Year Awards on 13 July 2017: 

I was asked today to speak to you this morning, in the main, about our economic outlook. 

Earlier this week, at a meeting with Treasury staff to discuss the budget process which is set to begin, one of our DDGs reminded me that economists in the market – in other words, many of you here today – know most of what we know. So that has a number of implications for our discussion.

Rather than tell you what is going on in the economy, I will focus on what it means, and what we should do about it. The economy has just entered recession, after several years of low growth. Lower than expected growth is likely this year, which will put strain on our fiscal framework. Going into the October medium-term budget policy statement (MTBPS), we will have some tough decisions to make. 

We are far from achieving the 5-6% growth we need to begin dramatically reducing poverty, unemployment and inequality. We are off track. This historical moment, therefore, requires that we harness our collective leadership, intellectual capacity and imagination, from all sectors of society. We need all of us – government, business, labour and civil society – to apply ourselves to growing the economy, while making it more inclusive, and fairer. 

The NDP commits us to pursuing growth and economic transformation. We need to do both. Growth without transformation is unjust, and will further exacerbate social tensions, fissures and instability. 

Transformation without growth is similarly self-defeating. In this regard, the nature of our public discourse on economic issues is of critical importance. In my view, too much of this discourse is politicized, centred around unhelpful binaries, arguing about concepts over content. The prime example of course, is the bogey-phrase, radical economic transformation. 

It has been, variously, criticized as either undefined, or a smokescreen for a plot to capture the state, or a sign of an impending shift to populist policies which will spell disaster. 

It has been falsely pitted against inclusive growth, or even radical socioeconomic transformation. Writing last week about our economic discourse at this moment, Professor Steven Friedman captures this “oddity” as he termed it, quite aptly. 

He wrote: “…why should it be interesting that ANC leaders say the economy needs to change radically? It is hard to think of any interest that could argue with a straight face that the economy does not need major change.

"It has slipped into recession after a long period of weak or non-existent growth. Much of black business and many black professionals insist they are still excluded from its engine room. Continued poverty and inequality confirm that many are denied its benefits. Given all this, supporting radical economic change should be simply a statement of the obvious.”

Prof Friedman goes on to speculate provocatively, as to why key economic actors are passive with regard to contributing ideas for a new economic direction: “The interests who may have something to say are members of the cosy club of insiders. They all know that the economy could be a whole lot better. But, since they benefit from what exists, trying to make sure that the government does not damage what they have seems less risky than opting for change. So they react to the ANC if it threatens current arrangements, but do not propose something better.”

His words, not mine. I raise this, because it speaks to the crux of the debate. Unless we have an economic discourse which generally seeks to confront and change the status quo, we will continue to speak past one another, and remain at cross-purposes. We need a truly developmental public discourse which seeks not only to protect the economy that exists, but accepts as a primary objective the need to reimagine and transform it to work for all South Africans. 

Many of you here today participate in and influence our public discourse on economic issues. You have valuable knowledge, experience and perspectives. We need more proposals on solutions.We are interested in your perspectives and ideas on how best to grow and transform the economy. We are committed to listening to a variety of views. 

I can guarantee you that whatever terminology is used, and whoever occupies the levers of political power, the marginalised majority of this country will continue to demand an economy that works for them also. The sooner we apply our collective ingenuity to facilitating this, the better off all of us will be. Later this morning I will announce government’s plan of action to restore economic growth.

During our intense discussions with the business sector over the last several months, it has been stressed to us that government needs to provide policy certainty, and act with urgency to complete growth-enhancing structural reforms which are in progress. 

These interventions are needed to restore business and consumer confidence, thereby lifting investment, spending and economic activity. 

Additional actions government would prioritise to transform the economy include the following:

• Ensuring black ownership in emerging sectors of the economy such as the ocean economy;

• Increasing the scale and scope of R&D to facilitate the development of new products and technologies;

• Ensuring targeted support and improving market access for SMME’s;

• Stamping out monopolistic practices - amending Competition Act, and Competition Commission investigating strategic sectors;

• Sourcing inputs for infrastructure projects locally;

• Effective enforcement of the revised broad-based black economic empowerment (B-BBEE) codes across different sectors;

• and Labour reforms, such as creating one million internships in conjunction with business and labour, as a major initiative to address youth unemployment.Specifically for the financial sector, National Treasury will be engaging with different stakeholders in the Financial Sector Charter Council under the following areas:

• Access and inclusion. This includes supporting strong market conduct and consumer protection legislation. For example: the Financial Sector Regulation Bill and the Financial Sector Conduct Authority and Ombud Council will be established in 2017 and the draft Conduct of Financial Institution Bill and the financial literacy policy will be published in 2017;

• Employment Equity. Addressing the deterioration of black representation in top management

;• Ownership transformation. Ownership of companies in the financial sector need to be addressed. National Treasury will compile and publish an ownership monitor for listed companies. In addition, the Financial Sector Charter has proposed R100 billion in funding to support black business growth in the sector;

• Procurement. Strengthening efforts to support black businesses’ participation as partners and suppliers. 

Despite the setback of the recession, there are some positives from which we can draw encouragement. 

A recovery in domestic GDP growth is achievable due to a number of favourable factors, including stronger global growth and global commodity prices, improved availability and security of electricity, and more favourable climate conditions. 

Additionally, an improved labour relations environment supported by key developments such as the agreement on the national minimum wage as well as agreed-upon dispute resolution mechanisms, will work to lower the incidence and extent of disruptive strike action. 

Following its Article IV visit, the IMF has adjusted its 2017 GDP growth forecast upward to 1 per cent (previously 0.8 per cent). The IMF’s growth outlook is  premised on:

• A supportive global environment represented by growth in our major trading partners, strong capital inflows into emerging markets and a recovery in commodity prices.

• The expected recovery in domestic agriculture and mining - strong linkages to other sectors in the economy means that a recovery in these sectors is likely to have positive spill over effects.

The primary external risks to South Africa’s growth outlook include the marked increase in global policy uncertainty as well as the threats posed to global trade by rising rhetoric speaking to more inward-looking trade policies. 

Lingering risks include adverse capital flows stoked by rising interest rates in advanced economies, weaker growth in China and increased geopolitical tensions. 

In the current economic conditions, economic growth at just over 1% is too low to address the triple challenges of high inequality, unemployment and poverty. 

Radical economic transformation is not only about redress, but ensuring that more people participate in the economy and that we change the structure of the economy to withstand current and future challenges. 

We must do more to encourage solidarity and collective action as the basis for a more equitable and cohesive economy and society. We need to encourage business to invest, transform ownership, management and supply chains, and create employment. 

Critically, all of us need to see beyond our narrow interests and perspectives, and find ways to collaborate and contribute towards the development of an inclusive, dynamic and prosperous nation.