Cyril Ramaphosa made a bold attempt to revive investor confidence in South Africa’s recession-battered economy by unveiling a stimulus plan to shift spending and axing contentious policies.
In a package of measures announced on Friday, the South African president said that the state would repeal regulations on mining and tourism that have been hostile to investment to halt a downturn in Africa’s most industrialised economy.
South Africa’s cabinet approved a new charter for the mining industry and will withdraw other mineral legislation that deepened uncertainty, he said. New visa rules will also be drawn up to end onerous paperwork for families visiting the country with their children.
“We are decisively and rapidly accelerating the implementation of key economic reforms that will unlock greater investment in growth sectors,” Mr Ramaphosa said.
He added that the reforms would “restore investor confidence, prevent further job losses and create new jobs” amid “severe” economic difficulties.
Mining companies had warned that thousands of jobs were at stake because of uncertainty surrounding the charter. The regulations set out targets for ownership of the sector by the black majority, which was excluded under apartheid.
While many challenges remain, these measures would go a long way towards making our economy more competitive compared to our emerging market peers
Mr Ramaphosa also announced that a 10-person advisory panel would look at the country’s contentious land reform programme.
Jabu Mabuza, co-convener of the CEO Initiative, a South African business group, said: “While many challenges remain, these measures would go a long way towards making our economy more competitive compared to our emerging market peers.”
Mr Ramaphosa, who took over as president this year after winning a power struggle with his corruption-plagued predecessor Jacob Zuma in the ruling African National Congress, had promised to end the economic stagnation that characterised Mr Zuma’s rule. But he has had to contend with dire state finances as another legacy of the former president, limiting his options on economic stimulus.
On Friday the former trade unionist cautioned that shifts in spending to favour infrastructure development “will take place within the current fiscal framework and in line with the normal budgetary process”.
South Africa’s Treasury is wary of increasing debt at a time when investors have punished fellow emerging markets such as Turkey and Argentina for lax fiscal policies. The South African rand was a victim of the sharp sell-off in emerging-market currencies this month.
South Africa is battling to keep down budget deficits to retain the country’s last remaining investment-grade credit rating, bestowed by Moody’s. Other rating agencies, concerned over graft and institutional decay under Mr Zuma, downgraded South Africa to junk status last year.
The rise to power of Mr Ramaphosa was initially welcomed by investors, who hoped he could reverse Mr Zuma’s legacy. He promised a “new dawn” for the economy and to root out perpetrators of state corruption.
But optimism has vanished as the economy plunged into its first recession since 2009 during the first half of this year. Output contracted 0.7 per cent in the second quarter following a 2.6 per cent fall in the first three months of the year.
South Africa’s economy has not grown by more than 2 per cent a year since 2013, given structural weaknesses such as high joblessness, which is at a 15-year high of over 27 per cent.
Mr Ramaphosa added that within weeks the state would also roll out a long-delayed auction of high-end radio spectrum that is seen as crucial for telecom companies to invest in faster 5G signal and cut data costs.
Source: Financial Times