Next week it will be two years since Cyril Ramaphosa became SA president. Whichever way you look at it, his leadership of the economy has been disappointing. The five economic policy gimmicks of his presidency have not delivered.
GDP per capita has declined for the past two years. The number of unemployed has increased by 1.1-million people since he became president. However, there is still no plan to get the economy out of its worst postapartheid crisis or restructure Eskom’s balance sheet. The IMF and World Bank have forecast three more years of declining GDP per capita.
Ramaphosa has announced two initiatives to create jobs. The private sector Youth Employment Service (YES) was supposed to create 300,000 jobs a year. Two years later, it has created 27,000 “work experiences”. This is a far cry from the 600,000 jobs that were promised. It is likely that many of these jobs would have been created without the initiative.
However, according to Stats SA’s latest labour force survey, the unemployment rate for young people aged 15-24, using the expanded definition, increased to 70% in September 2019 from 65.7% in March 2018 when YES was launched. The number of unemployed people in this age cohort increased by 166,000 to 2.6-million over the same period.
The Jobs Summit agreement between the government, business and labour in October 2018 was supposed to create 275,000 jobs a year. However, during the year after the summit the number of unemployed South Africans increased by 513,000. The expanded unemployment rate increased to 38.5% from 37.3% when the agreement was signed.
To increase investment in the economy, the president announced three initiatives. SA has an investment-to-GDP ratio of 18%. The target in the National Development Plan is 30% of GDP. This implies an investment shortfall of about R600bn. In 2018, Ramaphosa appointed investment envoys to spearhead a drive to attract $100bn over the next five years. In November, he appointed three former cabinet ministers as additional envoys. He also established an infrastructure office in the presidency.
In September 2018, he announced a stimulus and recovery plan that had no stimulus. It included a R400bn infrastructure fund that would blend public and private funds. In the 2019 medium-term budget policy statement, the Treasury said pilot projects had received R529.8m during the current financial year. There was R10bn in the baseline for the next three years.
Finally, the president convened two investment conferences, at the end of 2018 and 2019, which received pledges of about R650bn from companies. However, it is likely that many of the pledges would have happened without the conferences. Many companies seemed to have just repackaged existing projects in their investment pipelines as new ones.
During the four years between 2015 and 2018, there was an 8% decline in gross fixed capital formation, a measure of investment in the economy. The main reason for the decline was a public sector investment strike. Public sector investment — by the government and state-owned companies — declined 18%.
Private sector investment increased 4% between 2015 and 2018. But gross fixed capital formation is expected to decline during 2019, despite the pledges. The government cannot ask companies to increase it while it is cutting its investment. The more the public sector cuts its investment, the more it must ask from the private sector to prevent gross fixed capital formation from declining. This means the president could meet his $100bn target but gross fixed capital formation will still decline.
The time has come for Ramaphosa to stop the pointless gimmicks and endless summits and task teams and develop a plan to grow the economy. It will not end well if the economy continues on its current trajectory. It would be a sad day for the president to be tripped up for all the things he did not do, as opposed to the things he did.
• Gqubule is founding director at the Centre for Economic Development and Transformation.
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