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D-Day for Ramaphosa's economic stimulus plan

Sep 21 2018 07:26
Fin24 team

President Cyril Ramaphosa will unveil an economic stimulus package on Friday morning at 10:00 that he hopes will lift South Africa's sluggish economic growth rates and create jobs.

Concrete plans for an economic stimulus package were announced by Ramaphosa, in his capacity as ANC President, in late July after an NEC lekgotla. 

Earlier that month Stats SA had announced the economy had shrunk by 2.2% in the first quarter of the year, later revised downward to -2.6%. SA officially entered its first technical recession since 2009 in September, when GDP growth for the second quarter decreased by 0.7%.

This, in turn, pushed growth projections down. The Reserve Bank on Thursday again revised down its growth projection for 2018 from 1.2% to just 0.7%. While the content of Ramaphosa's stimulus package is unknown, government officials have over the past few weeks flagged some sectors as fundamental to its economic recovery plan. These include tourism, mining and agriculture. 

As Fin24 reported on Thursday, a team from National Treasury, together with colleagues in the Presidency and other state departments have been crafting the package for some time.

A Treasury official with knowledge of the plan said the stimulus package team worked on the principle that spending must be reprioritised toward areas of greatest economic activity, and away from consumption.

This ties in with reports that the package would be deficit neutral,  meaning the government will not spend extra or take on extra debt to cover the expenses of the package. Fin24 could not however confirm if this would indeed be the case. 

On Friday, Ramaphosa is expected to unpack the final version of the revised Mining Charter, which has been approved by Cabinet, using it as an example of regulatory certainty that he hopes will induce investment.

South Africa’s mining sector is still reeling from years of declining revenues and investors pulling back from the country.

The president is also expected to speak about changing the constitution to make it easier for land expropriation without compensation, and a possible relaxation of visa requirements to boost tourism.

Investors will be looking to see whether government commits backing any specific infrastructure projects.

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