JOHANNESBURG - The government is set to unveil a consolidated recovery plan this week after making a raft of amendments to the current lockdown restrictions in a bid to enable partial economic activity.
Experts said the government was in need of a new plan as the coronavirus (Covid-19) had all but wiped the country’s economic fortunes with forecasts flagging a deeper recession with unprecedented job losses this year .
The cabinet agreed at a virtual meeting this week to explore avenues for a consolidated economic reform programme.
“All the Cabinet clusters have been asked to work together to produce one consolidated document on key priorities of the country’s economic recovery plan, to be completed before the next Cabinet meeting,” it said in a statement.
The government had tasked the clusters - from the economic sectors, governance, social protection, trade and crime prevention - to draw the recovery plan.
The country has bled billions of rand since the five-week lockdown to curb the spread of the Covid-19, with the cost of the lockdown estimated to cost around R13 billion per day.
The recovery plan is understood to revolve around using existing resources to target certain industries and prioritising a phased in opening of the economy following the lockdown.
The International Monetary Fund (IMF) also confirmed that South Africa had not approached it for assistance despite speculation that the government would approach the lender of the last resort for funding.
IMF director of the African Department Abebe Aemro Selassie said South Africa generated its financing need for the government largely domestically and its own currency relative to most emerging market countries.
“There are no discussions on financing with [the] South African government,” Selassie said.
“South Africa has always had pretty good international capital access. Over and above that though, the country’s big strength is the fact that it has very deep and liquid domestic capital markets.”
The government this week permitted mining companies to resume 50 percent of normal production, opened ports for cargo exports, and expanded the list of essential goods but fired its first salvo on fiscal consolidation by refusing to implement salary hikes for civil servants as per a three-year wage agreement and refusing to offer further bailouts to SAA.
Intellidex’s Peter Attard Montalto said the outlook for the country was bleak as risks were on the downside globally due to the global recession and an economic downturn in key trading partners.
Attard Montalto said South Africa’s fiscal deficit could widen to 14.5 percent of the GDP as the country already has a R230 billion revenue hole.
“Adding all this together we came to our -9.7 percent GDP growth for this year and then see 4.5 percent for 2021 and 2.5 percent for 2021, followed by annual growth of around 1.0-1.5 percent only,” he said.
“We think that the room for additional monetary stimulus is weak from the current tool set and we are likely to see at some point a shift to more heft bootleg-strength quantitative easing.
“Our view is still that the only real way to offer stimulus is via the banks with a funding for lending scheme that combined National Treasury guarantees buffered by a capital structure and SA Reserve Bank below-repo discount window lending. We think such a plan will eventually come.”