President Cyril Ramaphosa has announced an economic stimulus package that will rely heavily on infrastructure to resurrect South Africa’s recessionary economy. As part of the package, a South African Infrastructure Fund will be launched. This is intended to reduce the current fragmentation of spending on infrastructure, and will ensure more efficient and effective use of resources, according to the President.

Economic stimulus package to focus on onfrastructureThe Fund will include a R400-billion contribution from the national fiscus over the next three years of the medium–term expenditure framework. It will be used to leverage additional resources from development finance institutions, multilateral development banks, and private lenders and investors.

Finance Minister Nhlanhla Nene told journalist at the media briefing announcing the formation of the Infrastructure Fund that money for the stimulus package will come through re-prioritising spending from other areas of the budget. While details will only be forthcoming in the upcoming medium term budget policy statement, Nene said that a number of trade-offs will have to be made and funds will likely be reallocated from non-performing government programmes.

Ramaphosa’s announcement included a number of other measures intended to boost investment and business. These include addressing concerns over the mining and minerals regime, as well as a review of the price of electricity, as well as ports and railway tariffs.

In addition, agriculture will be a focus area of the stimulus package. “Re-prioritised funding will be directed towards investments in agriculture and economic activity in townships and rural areas. Agriculture has massive potential for job creation in the immediate and long term,” Ramaphosa told the media.

The measures have received mixed reactions, with some economists warning that they do not go far enough. Ralph Mathekga, a Fellow at the SARChI Chair: African Diplomacy and Foreign Policy at the University of Johannesburg, says that the proposal is better described as an austerity measure than a stimulus package.

“A stimulus package should entail injecting money into the economy through instruments such as tax breaks and interest rate cuts. That being said, the austerity measures proposed by Ramaphosa have the potential to set the groundwork for a much-needed comprehensive stimulus package. The president's announcement on Friday is a step towards a stimulus package, clearing the groundwork,” he adds.

Business Unity South Africa (Busa) said it welcomed the appointment of an advisory panel of experts on land reform, as the model proved effective when deliberating on the National Minimum Wage and VAT. “Business has a long-term investment horizon, and President Ramaphosa recognises this reality in his statement. Business welcomes the shift in approach from the government,” said Busa’s CEO, Tanya Cohen.

Section 27 has also welcomed the stimulus package, which includes the upgrading of sanitation at schools, but says it’s far from good enough. As part of the package, more funding will go to sanitation at schools, with the goal to complete more than a thousand sanitation projects. However, the education NGO is still concerned about the vague announcement and mixed messages regarding how long it will take to eradicate pit toilets.

Image Credit: Flickr/GovernmentZAhttps://www.flickr.com/photos/governmentza/35157572196


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