South Africa’s president announced a multi-billion-dollar stimulus programme on Friday, earmarking funds for job creation and infrastructure development as he seeks to make good on a pledge to revive the country’s ailing economy.
Speaking a day after the central bank disappointed some in his ruling African National Congress (ANC) party by not cutting interest rates, Cyril Ramaphosa said the government needed to put the funds at its disposal to better use.
“We have to resort to reprioritising our budget,” Ramaphosa told reporters in Pretoria, adding that there was no room to increase spending or borrowing.
He said 50 billion rand ($3.5 billion) of “reprioritised expenditure and new project-level funding” would be used to boost economic growth and create jobs, and the government would also launch a 400 billion rand “medium-term” infrastructure fund.
“The central element of the economic stimulus and recovery plan is the reprioritisation of spending towards activities that have the greatest economic effect,” he said.
When he took over in February from Jacob Zuma, Ramaphosa staked his reputation on economic revival and he received a warm welcome from investors in part due to his strong ties to the business community.
But having stagnated for a decade, Africa’s most industrialised economy slipped further in the second quarter by entering recession for the first time since 2009, while the rand has weakened.
The local currency briefly extended gains after Ramaphosa’s speech before slipping back to trade 0.31 percent firmer against the dollar.
Some analysts were underwhelmed by the stimulus plan.
“This was a political speech. There was very little economics in it,” Nic Borain, an independent political analyst.
“It was a balancing act, although the market and other observers would have been looking for something more decisive. The real details will come in Nene’s budget in October.”
Warren Landgridge, a grain option trader at Riddermark Capital, said investing in agriculture would be a good move.
“It could only be beneficial for the country in the long term if money can be allocated to helping and equipping farmers,” he said.
Ramaphosa said the infrastructure fund would attract finances from development institutions and banks, private lenders and private sector and ordinary investors. [Agencies]