An infrastructure-led recovery plan for SA
MAIN IMAGE: Tholo Makhaola, president South African Institute of Black Property Practitioners (SAIBPP).
Tholo Makhaola, SAIBPP President
The South African government has been balancing the lives of its citizens and an economy in ICU on the tip of a very thin needle in a series of near death-defying decisions as it attempts to safely navigate the country through a pandemic.
In the past few months, it sent the country into lockdown, almost bringing the economy of South Africa to a halt in an attempt to understand the virus and curb the growing number of lives it was claiming on a daily basis. The negative effects of this lockdown are widespread and acutely felt by the entire nation. The pandemic has devastated the economy, seeing to a spike in unemployment statistics that affect the individual, the workforce, productivity and the economy.
In a move to stimulate the economy, the South African Reserve Bank (SARB) made several interest rate cuts, the most recent being on 23 July 2020. However, there has been criticism from economists stating that this move will not be enough to ensure the recovery of the economy.
In April 2020, the South African Institute of Black Property Practitioners (SAIBPP) penned a “10-point plan to catalyse economic development and drive the post-lockdown economic recovery”. We were at the time calling for the SARB to support economic recovery through further reductions in the repo rate by a further 200 basis points. We felt this would go a long way in stimulating the housing market which was decimated by the lockdown and would remain subdued during the forthcoming recession period.
This, we said, would also catalyse domestic investment. We also called for commercial banking to be investigated for uncompetitive conduct that has for years encouraged a collusive response to interrelated charges by not directly competing on retail lending rates.
“We need to accept that we cannot borrow ourselves out of the current problem.
Infrastructure-led economic recovery plan needed
It is important to state, however, that while I feel it is important for the SARB to assist economic recovery, there should not be an over-reliance on this institution alone. We believe the best way for the government to stimulate the economy, thus ensuring its quick recovery, is by developing and executing an infrastructure-led economic recovery plan.
A crucial step that the government needs to focus on is the revival of production. The infrastructure-led economic recovery plan should not be based on maintenance projects that previously existed but rather on the building of new infrastructure. If there is no focused plan to revive production, any interventions by the SARB to cut interest rates will not translate into a revived economy. As a result, the country would not have the knock-on effect it needs to be able to repay the loans it is taking out. The concern around the debt we are currently incurring is the great expense at which it comes considering the rand to dollar exchange rate. We need to accept that we cannot borrow ourselves out of the current problem.
There needs to be an acceptance that monetary intervention alone cannot get South Africa out of a fiscal problem which is the problem that we have because we are just not generating enough money as a country. To this end, it should also be noted that having taken out loans as a country, we need to pay them back which places a heavy burden on generating money as a country and should be considered in the development of the economic recovery plan.
Housing projects as catalyst for
With the encouragement of production, Government should also consider its long-term infrastructure intervention to be housing led. The rationale is that when houses are built, naturally all other forms of infrastructure follow. It therefore stands to reason that human settlements should be at the core of potential infrastructure delivery as it has the capability of igniting other infrastructure requirements. We therefore suggest that treasury authorise a stimulus package that begins to aggressively redirect at least 10% of government spending towards housing and infrastructure development, a further 5% towards information systems, knowledge sectors and the growing pool of professionals.
In a recent engagement themed “Re-imagining the township”, I noted one of the issues that affects productivity of the South African economy is the legacy of apartheid spatial planning which sees the majority of our workforce living far away from their places of employment. I noted that this phenomenon has a devastating effect not only on the worker’s pocket, but also on the social aspect of their lives and inevitably their overall productivity. A solution would therefore be to find creative ways of stitching our cities together through the use of infrastructure, for example, by ensuring greater linkages to more vibrant economic areas through reliable and convenient mass transit; this would go a long way in increasing the productivity of our cities.
“The current lack of confidence is brought about by the lack of transparency with which government has handled funds and procurement processes related to fighting the current pandemic.
A crucial part of economic recovery is also government recognising the role it plays in rebuilding business and consumer confidence in the country. It is important to remember that government itself does not build and instead relies on business in this regard. The current lack of confidence is brought about by the lack of transparency with which government has handled funds and procurement processes related to fighting the current pandemic.
South Africa has a money problem because nobody is spending money, so are unable to generate money due to uncertainty from all spheres of society. This is exacerbated by the lack of transparency displayed by government; transparency would go a long way in increasing confidence overall.
At this stage, we are waiting for the President and Finance Minister to announce the Government’s recovery plan, the details of which we will further scrutinise and will shape further interactions with relevant stakeholders as we seek to assist the economic recovery of South Africa.
About the author: Tholo Makhaola is the president of the influential advocacy body, the South African Institute of Black Property Practitioners (SAIBPP). He is passionate about transforming the property sector and regularly shares his views on this as well as other topical issues in the industry. Tholo also serves on the Real Estate Chamber of Services SETA.