ANC’s Economic Transformation Committee wants a pro-growth monetary policy to help SA rebuild

Enoch Godongwana, chair of the ANC's Economic Transformation Committee Photo: Thapelo Maphakela
Enoch Godongwana, chair of the ANC's Economic Transformation Committee Photo: Thapelo Maphakela
  • The ANC’s Economic Transformation Committee has published its discussion document on how SA can rebuild its economy to recover from Covid-19 effects.
  • Investing in infrastructure, accelerating land reform and industrialisation of labour-intensive sectors are among many proposals contained in the document.
  • But it also proposes sweeping monetary policy and financial sector interventions.

Establishing an infrastructure development agency, a job creation scheme to absorb less-skilled labour, adopting pro-growth monetary policies and making some changes in how pension funds invest their monies are some of the ideas that the ANC’s Economic Transformation Committee is proposing to help SA recover from the Covid-19 economic slump.

In a discussion document dated 8 July, which is aimed at providing "a framework for reconstruction, growth and transformation", the committee says that an infrastructure-led recovery in which SA employs labour-intensive techniques and sources as much of the inputs it needs locally, could help the country rebuild and create a new, inclusive economy.

Energy; water and sanitation; roads and bridges; human settlements, healthcare and education; digital infrastructure and public transport are the sectors that the committee says new investments should go towards. These are the same sectors that President Cyril Ramaphosa said would be prioritised during South Africa's inaugural Sustainable Infrastructure Development Symposium last month.

The document talks about the establishment of an infrastructure development agency that will sit in in the Presidency to help mobilise funds for the envisaged infrastructure projects.

But these plans and a host of other proposals in the document – such as providing more support to small and medium enterprises and accelerating industrialisation of labour-intensive sectors like agriculture – will need the country to mobilise new funding sources.

Pro-growth monetary policy

The committee said given that the fiscus is currently constrained, SA needs to adopt "pro-growth and pro-investment" monetary policy instruments; look at some aspects of the financial sector regulations and mobilise funds from development institutions, among other things.

"The Covid-19 crisis has provided a clear indication of the role the monetary authorities can play in injecting resources into the economy and in using bond purchases to stabilise capital markets and put downward pressure on longer-term interest rates.

"The ANC is of the view that the constitutionally-independent SARB should be fully state owned. This, however, must be done in a manner that does not unfairly enrich certain private SARB shareholders who seek to abuse the situation," wrote the committee in the discussion paper.

Financial sector intervention

The committee said changes should be made to Regulation 28 of the Pension Funds Act to enable cheaper access to finance for development and government should take proactive steps taken to increase competition in the banking sector.

"Processes towards the establishment of a properly capitalised and governed State Bank need to be accelerated. The State Bank must be able to access different forms of capital, in addition to taking deposits," said the committee.

It proposed that the Land Bank should have the capacity for wholesale deposits once it has solved its liquidity problems and the Post Bank's capacity should be "strengthened". 

No oomph, lacking specifics

Peter Montalto, head of capital markets research at Intellidex, said the problem with this discussion document is that it doesn't have oomph or move the debate forward. 

It would have been more valuable if it had timelines and directives for specific actions, he added.

"[It] is lacking in specifics on changes and reforms, regulation and legalisation required. So, it floats at a high level. 

"The SARB bits are interesting and will create some disquiet in the markets but won't get anywhere, similarly on talk about garnering private pensions capital and on land reform," said Montalto.

He said these proposals create uncertainty even if they don't happen.

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