The economic plan presented by the government last week was “fragmented and uncoordinated”, suggesting that there had been little discussion on the proposals, South Africa’s largest business lobby group has said.
State officials met business and labour union representatives on Thursday to discuss ways to revive an economy set to contract this year by the most in nine decades.
Industry delegates offered a 900-slide presentation and labour groups showed “detailed” proposals, with government presenting a 17-slide draft plan, Business Leadership SA CEO Busisiwe Mavuso said on Monday.
“It appeared to have been pulled together at the last minute, from a variety of different sources without any discussion between them,” Mavuso said.
“There are good people inside the presidential economic advisory council and among the analysts at National Treasury, for example, but why are they not being mobilised to do the research to form a coherent plan?”
President Cyril Ramaphosa said on Saturday that government was working on an urgent economic recovery programme, details of which would be announced in “the next few weeks.”
Mavuso said Ramaphosa has yet to deliver on a pledge made four months ago to present a decisive economic plan.
“He promised in April that we would have it ‘within days’,” she said, adding that it was clear from the presentation that “not much has really been done since”.
The Covid-19 coronavirus pandemic struck at a time when South Africa’s economy was already vulnerable and technically in a recession. Real GDP had contracted at an annualised rate of 0.8% and 1.4%, respectively, in the last two quarters of last year owing to falling export demand, weak business confidence and investment, and the return of load shedding.
According to the SA Reserve Bank, South Africa also experienced an increase in capital outflows and significant currency weakness between March and April. The rand depreciated by 22% between February and the end of April.
Over the same period, the yield on the 10-year government bond rose by more than 200 basis points, money market liquidity was thin and GDP declined by 7.3%.
The Reserve Bank reacted by cutting its benchmark rate by 300 basis points to 3.5% this year, with the last downward change implemented on July 24.
It also put in place intraday overnight supplementary repurchase operations aimed at providing liquidity support to commercial banks.
A three-month repo facility was introduced in addition to the weekly main refinancing operations. The end-of-day lending rate on the standing facility was reduced from repo plus 100 basis points to the current repo rate.
The Reserve Bank also began a programme of purchasing government securities in the secondary market.
That focus on interest rates, inflation targeting and price stability has become the subject of much debate. – Bloomberg