Economic stimulus package must be underpinned by meaningful reform

22 April 2020

Note to Editors: The following remarks were delivered by the DA Leader, John Steenhuisen MP, during a digital press conference following the address by the President on 21 April 2020. Please find attached soundbite from John Steenhuisen MP.

The DA welcomes the stimulus plan announced by President Ramaphosa last night. The measures included in this plan are broad enough to make a significant impact, and they are targeted at the right areas to help achieve the three objectives we identified for such an economic support package: keeping as many people employed as possible, keeping as many businesses open as possible, and intervening to help the poor and the hungry.

Importantly, the President resisted the pressure from inside his own party and alliance to fund this stimulus package from unsustainable and counterproductive sources like the PIC and tax hikes. His decision to approach global institutions such as the International Monetary Fund (IMF) and the World Bank for loans to make up our shortfall – after budget reprioritisation and accessing UIF reserves – was the right one.

We also welcome the direct nature of the poverty relief measures announced. Paying cash directly to poor families and making loans directly available to small businesses is the most rapid, effective way to target such relief efforts.

The R20bn allocation to healthcare is also an important announcement, as our ability to effectively treat and control the spread of the virus will determine when and how our economy can return to a semblance of normal again. It is crucial that this budget is spent wisely.

Apart from capacitating all our hospitals and procuring sufficient PPE and ICU equipment, a significant portion of this budget must go towards a large-scale testing, tracing and tracking programme that can provide us with an accurate picture of the spread of the virus.

It is also crucial that we enable and enforce the mandatory wearing of cloth facemasks in public, as this has been proven to be one of the most effective ways to halt the virus. This is a public good, and people who need them should be provided with masks free of charge. For around R600m we can provide 40 million poorer South Africans three reusable facemasks, and this would be money very well spent.

And finally, we welcome the President’s commitment to a phased re-opening of our economy and an end to the total lockdown, which is costing us around R13bn a day. This risk-adjusted phased approach to opening society and the economy, based on scientific evidence, is near identical to the Smart Lockdown Plan proposed by the DA, and it needs to be implemented as soon as possible.

Broadly speaking, this appears to be a stimulus plan aimed at the right people and funded through the right means. Five hundred billion rand is a significant injection and, if executed correctly, could be the kick-start our economy needs to recover from the effects of Covid-19 and the lockdown. It is now important that the roll-out of these relief measures – as well as our progress in testing and tracing, and our hospital capacity – is communicated regularly and transparently.

However, our support for the plan is not unconditional, as there were several aspects of last night’s announcement that were either ambiguous or very short on detail. For example, the challenging logistics of paying out the temporary unemployment grant. If this fails on implementation, the resultant frustration and backlash could pose a threat. We would also have liked to see a larger social grant increase – R1000 top-up for all grant types – but for a shorter period of three months, as opposed to a smaller top-up for six months.

The President also failed to make any mention of the massive increase of 73,000 soldiers to be deployed to our streets, as announced just prior to his televised address. This militarisation of our society and the state is a threat to our democracy, regardless of the circumstance under which it takes place. South Africans are owed an explanation.

The President spoke of a total economic reset – which our country desperately needs – but it wasn’t clear in which direction this reset would go. In a carefully worded speech, a tainted acronym like RET was out of place and the President failed to explain what he meant, in the context of the announcement, by Radical Economic Transformation.

If, by economic reset, he means a reboot of the economy in a way that restores investor confidence and makes South Africa an attractive and easy place to do business, then we are 100% behind him. But we cannot support him if he chooses instead to continue to walk the tightrope of ANC factionalism.

He spoke of economic reforms that would follow this stimulus, and this is arguably the most critical part of the plan. Because without fixing the underlying structural defects that put us in recession even before the pandemic hit, the effects of this R500bn injection will be short-lived and we will end up worse off than we were before.

This is an opportunity for the reformists in government to stand up to the enemies of growth within its own ranks. Never has there been a better time to push through reforms to our energy sector, to our SOEs and to our labour legislation. Never has there been a better time to cut the proposed R160bn from the public sector wage bill. Never has there been a better time to sell off SAA and to abandon the economic self-destruction of proposed policies like property expropriation, nationalisation of the Reserve Bank and prescribed assets.

If we want to make this R500bn injection work for SA, then the economic reforms that follow are far more important than the stimulus itself.

Issued by John Steenhuisen, Leader of the Democratic Alliance, 22 April 2020