JOHANNESBURG – Economists on Thursday gave a cautious thumbs-up to Finance Minister Tito Mboweni’s new growth plan, with most saying it could help to pull the country’s struggling economy from stagnation.
Old Mutual Investment Group chief economist Johann Els said the growth plan was generally positive.
“The ideas contained in the report are mostly pragmatic, given it is not too ambitious and at the same time not overly contentious. The main aim appears to be to ease growth constraints, with significant emphasis on increasing competitiveness and making it easier to do business with South Africa,” Els said.
“It provides policy proposals that are not yet approved by the Cabinet, but given that most of the ideas are not new, some consultation might have taken place already.”
The National Treasury released the plan just two months shy of the next presidential investment conference scheduled for November, and Moody’s much-awaited rating review on the country’s sovereign debt in November.
The plan advocates for the modernisation of network industries to promote competitiveness and inclusive growth.
It also seeks to lower barriers to entry and addressing distorted patterns of ownership through increased competition and small business growth.
The Centre for Development and Enterprise in a research paper said that South Africa’s government had outstanding debts of more than R3 trillion.
Ann Bernstein, executive director, said the country would solve its fiscal dilemma without prioritising growth.
“We need a tough-minded growth strategy that is vigorously implemented,” Bernstein said.
“That means fixing public finances, but also requires decisive action on grasping the nettle on basic education reform and opening up to foreign skills, providing reliable, affordable energy, changing the labour market to create a more labour intensive economy, and fixing the attitudes and regulations that hold business back.”
The plan is centred on interventions to tackle the financial and operational challenges of Eskom and grow the economy to absorb more people into the labour market.
Mboweni said the plan would add 0.8 percentage points to growth in the short term, and 1.8 and 2.3 percentage points on average in the medium to longer terms.
North West University economist Raymond Parsons said for the plan to work South Africa needs a capable “delivery state” as a key mechanism to ensure positive outcomes. “SA must now steadily move from drafting plans to tangible implementation in ways that strongly boost investor confidence and also make a visible difference to the lives of average citizens,” Parsons said.
“The plan’s framework confirms that there can be no ‘quick fix’ for SA’s socio-economic challenges, but it nonetheless correctly urges that the fundamentals for a higher growth trajectory must be laid now to reap tangible benefits later.”
NKC analyst Jacques Nel said the plan was a pragmatic assessment of the country’s economic picture.
Nel said the biggest challenge would, however, be in its implementation.