Economists underwhelmed by Gigaba's economic action plan

Finance Minister Malusi Gigaba. (Pic: Gallo Images)
Finance Minister Malusi Gigaba. (Pic: Gallo Images)

Johannesburg – There is nothing profound about government’s 14-point plan to revive the economy and most of the interventions are not new, economists have said.

Investment analyst Chris Gilmour, who spoke to Fin24 following Finance Minister Malusi Gigaba’s announcement on the action plan for the economy on Thursday, said it is achievable but won't make a difference.

“It is business as usual and I don’t think this is the kind of profound change I was looking for … We were led to believe 10 days ago that something of an order of 6% (growth) would be forthcoming.

“Rather than ‘business as usual’, we needed something more profound to get that 3% to 6% growth rate to get out of this bad situation,” he said.

Gigaba announced the plan at the JSE, following a meeting with the president and several ministers, as well as engagements with stakeholders such as ratings agencies and investors. The plan was drawn up to address concerns about the economy, which is in a technical recession and has a growth target of 1.3%.

Each action item has a minister assigned to it along with a deadline. Details of the plan will be revealed at the mini budget in October, said Gigaba. Treasury will monitor the implementation of the plan, Gigaba said that the deadlines will be effective.

Gilmore told Fin24 that the timelines will hold the responsible minister accountable but is doubtful that this could raise confidence levels, as Gigaba suggested it would. “It is basically telling us what his job is and how we can measure it,” said Gilmore.

Tight deadlines put responsible parties on the spot

Economic strategist at Argon Asset Management Thabi Leoka said the 14-point plan is one of many. However, the good thing about the plan is the short-term deadlines for the end of the year and in March 2018. “If we have not reached these targets by the end of these deadlines, then we are within our rights to criticise these plans.”

Jeffrey Schultz, economist at BNP Paribas, said that Gigaba was “bold” to include physical timelines to achieve the different objectives. “Some level of credit does need to be given to the finance minister and his team, however, for putting their necks on the line.”

Schultz said financial markets are likely to be sceptical about the plan. Most of the interventions are not new, but in the past there has been a lack of implementation. “The proof will be in the pudding and the pressure will be on for Minister Gigaba to already show some deliverables by the time of the October medium-term budget.”

Democratic Alliance MP David Maynier criticised the plan for not having “one big, bold, new idea” to restore business confidence and generate private sector investment.

“The minister simply does not have the political will, or the political space, given the ongoing 'civil war' within the governing party ahead of the ANC’s 54th National Conference 2017, to implement the structural reforms necessary to boost economic growth and create jobs in South Africa.”

Radical economic transformation'not to be feared'

Gigaba reiterated that economic transformation remains at the heart of the plan. He said that achieving transformation is of equal importance to staving off another credit downgrade.

“Growth without transformation is unjust, and will further exacerbate social tensions, fissures and instability. Transformation without growth is similarly self-defeating,” he said at the Thomson Reuters awards held earlier. 

Gigaba said the economy is strained and tough decisions will have to be taken at the October mini budget.

“We are far from achieving the 5% to 6% growth we need to begin dramatically reducing poverty, unemployment and inequality. We are off track,” he said.

ALSO READ: LIST: SA's official 14-point plan to solve economic slump

Gigaba said it is important to make a “genuine effort” to achieve 3% growth and sustainably reach levels as high as 6% to combat poverty, unemployment and inequality. Government and business should have good relationships to achieve needed growth, he added.

He said people should not fear radical economic transformation and it should not be viewed as the implementation of reckless policies or a shift to populist programmes. Rather, it should be seen as steps towards inclusive growth.

Restoring confidence

Gigaba welcomed a commission of inquiry into state capture of state-owned enterprises. Addressing corruption is needed to restore investor perceptions of the economy but tackling corruption alone won’t help restore investor confidence, Gigaba explained.

The steps announced demonstrate the extensive measures government is taking to correct the economy, according to Gigaba. 

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