On Thursday, President Cyril Ramaphosa will deliver his second state of the nation address to parliament. However, there is still no plan to get the country out of its worst post-apartheid economic crisis a year after he became SA president.
In his campaign to become ANC president, Ramaphosa called for a “new deal” for SA. There was a wave of optimism before and after his election as party president in December 2017. The rand appreciated 20% against the dollar to a high of R11.50c on February 26 2018. However, the “Ramaphoria” in financial markets had dissipated by the end of the first week of May as the rand had depreciated to about R12.60 against the dollar.
In his 2018 state of the nation address, Ramaphosa promised to host two summits — on investment and jobs — that would develop a “a new partnership to build the nation”. In February of that year, then finance minister Malusi Gigaba delivered a budget that in effect cancelled out the impact of an inspiring state of the nation address that quoted from Hugh Masekela’s song, Thuma Mina (Send Me).
The budget included austerity measures of R63bn for the next year that were equivalent to about 1.3% of GDP. I wrote at the time that the austerity could tip the economy into another recession and result in an increase in unemployment to more than 10-million people.
During his first 100 days as president, Ramaphosa launched the youth employment scheme (Yes), a partnership with business to create 1-million work opportunities in three years, or 330,000 jobs a year. He also appointed investment envoys who would hunt for R1-trillion to kickstart the economy. In September the president announced a “stimulus and recovery plan”. In October, the jobs summit agreement said it would create 275,000 jobs a year. At the investment summit at the end of the same month, the president announced pledges of R290bn.
However, Yes is a gimmick, a Band-Aid solution to the country’s unemployment crisis. You cannot create sustainable employment out of thin air in an economy that is not growing. As Stephanie Kelton, a US economist who advised former presidential candidate Bernie Sanders, says: “Capitalism runs on sales. In survey after survey we find that the number one reason businesses are slow to hire and invest in new plant and equipment is a lack of demand for the things they produce. Businesses hire and invest when they’re swamped with customers.”
A year later, 319 companies have registered for the programme and made commitments to provide 6,900 work opportunities. Only 2,000 people are actually working, according to Yes CEO Tashmia Ismail-Saville. “It is very difficult because of the state of the economy. If there were more vacancies, we would have placed them,” she says.
Ramaphosa’s so-called stimulus and recovery plan is not a stimulus. You cannot have a stimulus within the context of an austerity budget. That is an oxymoron. Nowhere does the jobs summit framework agreement explain how it will create 275,000 positions a year. The agreement has a list of mostly small projects, some of which companies had previously announced and repackaged for the summit, that do not have the scale to confront the unemployment crisis.
The investment envoys are also a gimmick. Again, you cannot create investment out of thin air. Investment follows economic growth. It does not kickstart the economy. At the investment summit some pledges clearly involved the repackaging of old commitments. For example, the largest pledge was from Anglo American, but $2.2bn of the $6bn pledge referred to the construction of the Venetia diamond mine, a project launched in 2013. A significant portion of the investment has already happened.
Next week, Stats SA will announce that the number of unemployed South Africans has increased to more than 10-million, a rise of more than 1-million people in a year. It will announce that GDP per capita declined in 2018 for the fourth consecutive year.
And it will decrease again in 2019 unless the government announces emergency measures to revive the economy. The time has come for the president to move beyond the endless gimmicks and buzzwords that are taking us nowhere.
• Gqubule is founding director at the Centre for Economic Development and Transformation.
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