Cape Town – The investment necessary to fund South Africa’s economic reconstruction and recovery plan (ERRP) depends on confidence in government’s ability to carry out the plan efficiently, following principles of clean governance, and demonstrating the will to implement desperately needed economic reforms, the Banking Association of South Africa (Basa) said on Saturday.
The ERRP unveiled on Thursday by President Cyril Ramaphosa – the product of months of consultation with the National Economic Development and Labour Council (Nedlac) social partners – laid out a clear and inclusive path to recovery and reconstruction, Basa said in a statement.
While Basa wholeheartedly supported the plan, it was also keenly aware that many of the initiatives outlined were on the cards long before the onset of the coronavirus (Covid-19) and should have been implemented years ago.
However, Basa was encouraged by the president’s acknowledgement that the severity of the current crisis left the country with no choice but to execute even the most ambitious aspects of the plan with the utmost urgency.
True to Ramaphosa’s characteristic approach of tackling endemic and structural problems through social compact, the plan called on business, the public sector, and broader society to assist in mitigating the devastating impact of the pandemic and consequent lockdown on the already struggling economy.
Many of the initiatives identified – large-scale public works, employment stimulus, reindustrialisation and rapidly expanded energy generation capacity – were included in the “Economic Transformation, Inclusive Growth and Competitiveness” paper that the minister of finance published in August 2019.
But the ERRP went further in identifying specific government-led interventions. One of the boldest involved more than R1 trillion in targeted infrastructure development projects over the next four years. These projects could be the catalyst required to set the economy on an upward growth path.
However, the level of investment needed to fund such an ambitious infrastructure programme would only be forthcoming if there was confidence in this government’s ability to carry out the plan efficiently, following principles of clean governance. The government also needed to demonstrate the will to implement desperately needed economic reforms, Basa said.
Apart from infrastructure development, the focus on state-owned enterprises (SoEs), and the tough decisions required on their future, was again something which had been on the cards for many years.
Ramaphosa said investor, consumer and public confidence was necessary to help transform South Africa. This could be achieved only by continuing the fight against corruption, addressing energy constraints, and ensuring fiscal stability through prudent spending.
In particular, the government needed to address the public sector wage bill and ensure proper governance of all state institutions, especially the SoEs.
The banking sector would continue to play a critical role, assisting companies with the funds needed to stabilise and ultimately grow their businesses, thereby creating employment opportunities, expanding the tax base, and contributing to the inclusive growth of the economy.
At the same time, banks would remain mindful of their responsibilities as the custodians of the deposits and salaries of South African workers.
“As the president indicated, we still don’t know how long this pandemic will last. However, by addressing the issues that have historically hampered business confidence – policy uncertainty, the slow pace of economic reform, unreliable electricity supply, and endemic corruption – the ERRP has the potential to create opportunities for enterprise, bolster demand for credit, and unlock funds for productive investment.
“Basa believes that by mobilising all state institutions with urgency, efficiency, and proper governance, and delivering on plans for infrastructure development and other key priorities, government can build business and investor confidence and set the country on the long road to reconstruction,“ the association said.
African News Agency (ANA)