The ANC has unveiled its plan for economic recovery post Covid-19, including in it a proposal that pension funds should take over restructured Eskom assets. There appears to be broad agreement that South Africa needs to come up with an urgent recovery plan for the economy. Shortly before the ANC made its announcement, Business for South Africa unveiled its “parachute” for South Africa that they say could lead to recovery to what the country looked like pre-Covid-19 in three years. If the government does not implement their plan, B4SA say, the economy – already over the cliff – could find itself in a sovereign debt crisis or could be a failed state in five years. – Linda van Tilburg
The ANC’s Economic Transformation Committee, headed by Enoch Godongwana, was tasked by the organisation in February to look at how the South African economy should be restructured to deal with Covid-19. The final version of the discussion document was revealed to the media. It emphasises the need for accelerated implementation of a reconstruction and development plan, with an emphasis on infrastructure projects. The issue that is likely to ignite a heated debate in South Africa is the focus on pension funds and their role in rescuing Eskom.
The national executive in February tasked the Economic Transformation Subcommittee (ETC) of the National Executive to develop a document or plan on what key interventions we can make during Covid-19 and beyond to assist in stimulating growth. So this document is a product of that work.
The Economic Transformation Committee of the ANC has released an important document on economic interventions needed to create more jobs and stimulate accelerated growth and investment in the South African economy. The ETC document is titled Reconstruction, Growth, Transformation: Building a New Inclusive Economy.
The new policy framework will mobilise society around an infrastructure-led recovery with new investment in energy, water and sanitation, roads and bridges, human settlement, health and education, digital infrastructure and public transport. To achieve significant job creation multipliers, the emphasis will be on localisation, including maximising the use of South African materials and construction companies, as well as labour intensive methods.
The establishment of an infrastructure development agency in the Presidency will have to drive infrastructure investment as we’ve expanded use of public, and private partnerships. Furthermore, the district development model should be strengthened to improve service delivery and infrastructure expansion in both the rural and urban units.
It is through proper coordination that service delivery will be improved and new spacial forms in settlement and transport systems will be created. The new framework will promote investment in key productive sectors such as agriculture, manufacturing, mining and tourism and other services.
Decisive progress will be required in telecommunication reform, including expediting digital migration and spectrum allocation to reduce data cost for households and friends. Similarly, the growth and job creation potential of energy related investment must be fully harnessed as envisaged in the Integrated Resource Plan. Industrialisation and expansion of software productive sectors will be accelerated to increase international trade, especially with other countries on the African continent.
While working to restore fiscal sustainability. South Africa needs to deploy macro-economic policy instruments that are compatible with the reconstruction of our economy. The National Treasury, South African Reserve Bank, development and financial institutions and private financial institutions will have a role to play. The mobilisation of funds for increased investment in infrastructure and key productive sectors will inevitably require a combination of public and private resources.
As part of this combined effort, changes should be made to the Regulation 28 under the Pension Funds Act, to enable cheaper access to finance for development. Furthermore, regulators should be vigilant to ensure increased competition in the banking sector, which frequently displays the kind of oligopolistic tendencies which limit access to finance, particularly for small and medium enterprises and for households in historical disadvantage areas. Financial inclusion is key and the banking sectors, practises and instruments should be adjusted to be more inclusive.
In order to facilitate a society wide mobilisation of financial and real resources to advance progress, economic reconstruction, processes of social dialogue and social compact both at national and sectoral level will be required to unite action in key constituencies, including business, labour, community and government.
To lead this process, South Africa’s presidency should be strengthened to play a decisive role in their economic policy coordination and working in close liaison with government’s economic cluster, which should closely monitor and manage effective policy execution.
In recent weeks, as a result of both the impact of Covid-19 and pre-existing weaknesses in South Africa’s economic performance; business, government and labour constituencies have all been focussed on developing plans for the growth and reconstruction of the South African economy. The ANC regard this a positive development, which will facilitate the kind of social dialogue and social compact which will have put the country on a new growth path and begin to build a more inclusive and more just economy for all.
Mr Gogondwana said the ANC has not prescribed what changes there should be to the Pension Fund Act; he said what the ANC has put forward is a discussion document. He also said the ANC has moved away from a policy of targeting the Public Investment Corporation for an Eskom bailout; they want to engage the top 20 pension funds in South Africa.
To the extent that there’s a mention of the PIC (Public Investment Corporation), I would prefer to use pension funds, not PIC. I would prefer to engage with pension funds on the movement forward and indeed we are – the top 20 pension funds have an organisation which has initiated on its own discussions with us. In that regard, we are engaging with PIC as part of the top 20 pensions funds that are part of that organisation.
This is Linda van Tilburg for BizNews.