South Africa's economy recovery plan in brief

Ahead of the Mid-Term Budget Speech, scheduled for the 21st of October (likely to be postponed until the 28th of October), President Cyril Ramaphosa has unveiled governments economic recovery plan.

The objectives of the plan are to create jobs, largely through aggressive infrastructure investment and mass employment programmes which include:

  • reindustrializing the economy, focusing on growing small businesses
  • accelerate economic reforms to unlock investment and growth
  • To fight crime and corruption
  • To improve the capability of the state

The president has highlighted the following interventions within the recovery plan:

  • achieve sufficient, secure and reliable energy supply within two years
  • create and support over 800,000 work opportunities in the immediate term to respond to job losses
  • unlock more than R1 trillion in infrastructure investment over the next 4 years
  • reduce data costs for every South African and expand broadband access to low-income households
  • reverse the decline of the local manufacturing sector and promote reindustrialisation through deeper levels of localisation and exports
  • resuscitate vulnerable sectors such as tourism, which have been hard hit by the pandemic

In terms of Infrastructure plans over the next six months the plan is to:

  • Embark on the modernisation and refurbishment the commuter rail network, include the Mabopane Line in Tshwane and the Central Line in Cape Town
  • Expand the national rural and municipal road rehabilitation and maintenance programme using labour intensive methods
  • Fast-track the implementation of gazetted strategic infrastructure projects through the approval of credit enhancing instruments, provision of bulk infrastructure, and speedy processing of water use licenses, environmental impact assessments and township establishment
  • Adapt the infrastructure procurement framework to enable public-private partnerships and unlock new funding

In terms of rapidly expanding energy capacity within the country the plan is to:

  • accelerate the implementation of the Integrated Resource Plan to provide a substantial increase in the contribution of renewable energy sources, battery storage and gas technology
  • finalise agreements with Independent Power Producers to connect over 2,000 MW of additional capacity from existing projects by June 2021
  • adapt current regulatory framework to facilitate new generation projects while protecting the integrity of the national grid
  • Fastrack applications for own-use generation projects
  • Continue work with regards to restructuring Eskom into separate entities for generation, transmission and distribution

In terms of job creation the plan is to:

  • create 300,000 opportunities for young people to be engaged as education and school assistants at schools throughout the country, to help teachers with basic and routine work
  • Create 60 000 jobs for labour-intensive maintenance and construction of municipal infrastructure and rural roads
  • add 6 000 community health workers and nursing assistants to the healthcare system as government looks to proceed with the implementation of National Health Insurance
  • expand public employment at the provincial and city level, contributing to cleaner, greener and safer public spaces and improved maintenance of facilities
  • assist young people who are unemployed to access these and other opportunities, by launching the national Pathway Management Network as a platform for recruitment and other forms of support

In terms of employment stimulus the plan is to:

  • expand grant-making programmes in the creative, cultural and sports sector, with funding allocated to protect jobs in cultural institutions such as museums and theatres
  • extend the Special Covid-19 Grant by a further 3 months
  • secure 40 000 vulnerable teaching posts which have lost income from fees

In terms of driving industrial growth the plan is to:

  • have localisation targets for goods in areas like agro-processing, health care, basic consumer goods, industrial equipment, construction materials and transport rolling stock
  • enforce government policies to ensure that all public infrastructure projects use locally-made materials, including steel products, cement, bricks and other components
  • support the efforts by organised business, by establishing supplier development programmes for large companies and in key sectors
  • support SMME participation in the manufacturing value chain
  • provision for business infrastructure support, financial assistance through loans and blended funding, facilitating routes to market, and assistance with technical skills, product certification, testing and quality assurance
  • reduce current timeframes for mining, prospecting, water and environmental licenses by at least 50% to facilitate new investment
  • support tourism over this peak tourism season, by publishing an expanded list of countries from where resumption of international travel will be permitted, which will be supported by targeted marketing in partnership with the private sector
  • publish a revised list of critical skills, occupations in high demand and priority occupations to enable highly skilled individuals to be speedily recruited, and expedite the issuing of special skills visas to support local firms
  • improve the efficiency and capacity of the ports of Durban, East London, Ngqura and Cape Town
  • release high-frequency spectrum by March 2021 with the completion of digital migration to help reduce data costs for firms and households

In terms of crime and corruption the plan is to:

  • use a Joint Rapid Response Team at a national and provincial level to respond to the problem of violent disruptions at construction sites and other business activities
  • clamp down on the illegal economy and illicit financial flows, including transfer pricing abuse, profit shifting, VAT and customs duty fraud, under-invoicing of manufactured imports, corruption and other illegal schemes
  • ensure that political office-bearers at all spheres of government do not do business with the state
  • further decisive action to prevent, detect and act against Covid-related corruption will strengthen the broader fight against crime
  • fastrack the Public Procurement Bill and transversal contracts put in place for large-volume items

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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