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Mbeki Criticizes Ramaphosa’s Economic Recovery Plan, Says It Lacks Funding Details

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CHARLES MOLELE

FORMER president Thabo Mbeki has delivered a brutal yet honest critique of President Cyril Ramaphosa’s much-vaunted Economic Reconstruction and Recovery Plan. In the latest edition of his foundation’s newsletter, Mbeki slammed Ramaphosa’s plan, which is anchored around boosting spending on major infrastructure projects and investing in new energy generation projects, saying it doesn’t provide details on how it’s going to be funded.

Ramaphosa’s plan was presented during a joint sitting of Parliament in October, promising to create 800 000 jobs, growing the economy by 3%, spending R1 trillion on infrastructure and hiring thousands of assistant teachers.

Mbeki also questioned how Ramaphosa’s plan will help eradicate the apartheid and colonial legacy, including the time frames within which these interventions would produce this result.

Mbeki added that Ramaphosa did not explain what these ‘catalytic projects’ were and whether the funds are indeed available for their immediate implementation.  

He said the plan risks being a “mere vision until resources are made available to enable their implementation.”

This is why it is imperative that the Government publishes another document which gives a realistic and credible indication of the capital that is and/or will be available to fund the ‘Reconstruction and Recovery Plan, Mbeki argued.

Mbeki said Ramaphosa stated: “The Infrastructure Fund will provide R100 billion in catalytic finance over the next decade, leveraging as much as R1 trillion in new investments for strategic infrastructure projects.”

He said this suggested that the only thing that is certain about the funding of the infrastructure rollout for the period up to 2030 is that at least R10 billion will be spent annually.

“Obviously this would not be enough to bring about the major socioeconomic changes visualised by the President,” said Mbeki.

 Mbeki said Ramaphosa also made other ‘worrying’ statements on this matter of funding the infrastructure rollout, such saying, “we are exploring the use of credit enhancing instruments to unlock bulk water infrastructure and national roads improvement projects.”

The former president said it was necessary to explain what credit enhancement means because Ramaphosa integrated it in the context of the projected infrastructure funding.

Through his [Ramaphosa] mention of credit enhancement the President communicated the message that at least some of the infrastructure rollout will be financed through money borrowed in the financial markets.

“The President did not explain how much of the projected infrastructure-spend would be borrowed money,” said Mbeki, under whose nine years in office the South African economy had its longest period of expansion since the end of World War II.

Under Mbeki, who succeeded Nelson Mandela in 1999, the country’s macro-economic policy was welcomed by the private sector, both locally and abroad, as well as by international institutions such as the International Monetary Fund (IMF) and the World Bank, but not by the labour unions, particularly COSATU, who criticized government for committing itself to neo-liberal policies.

Ramaphosa’s economic plan was drawn up with business and labour groups and includes the government spending 100 billion rand ($6 billion) on new infrastructure over a decade — an undertaking the president expects to attract a further 1 trillion rand of private investment within four years.

Africa’s most-industrialized economy was already in the doldrums before the coronavirus struck and ground to a near halt after a lockdown was imposed in late March to curb its spread.

Political strife during the past decade worsened investors’ risk aversion to South Africa, Mbeki said.

“There has been a sustained and continuing process of the export of capital,” Mbeki said.

“This has not been for the mere purpose of diversifying portfolios but a step toward the relocation of the businesses and business people concerned.”

Mbeki said the proposition that one of the criteria for the financing of projects through the employment stimulus was ‘the greatest impact on economic recovery’ has little substance.

(SOURCE: INSIDE POLITICS, with additional reporting by agencies)

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