South Africa’s president, Cyril Ramaphosa announced a multi-billion-dollar stimulus program earmarking funds for job creation and infrastructure development to revive the country’s ailing economy. Fifty billion rand ($3.5 billion) would be used to boost economic growth and create jobs, and the government would also launch a 400 billion rand “medium-term” infrastructure fund.
It may be noted that the central bank was expected to cut interest rates, to kick start the economy. However, the Bank’s decision to not cut the interest rates disappointed many. The President’s argument was that there was no room to increase spending or borrowing. It is doubtful whether the people who expected that the interest rates would be reduced buy this argument. When he took over in February, 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 indications are that Africa’s most industrialized economy is in a trajectory of recession slipping deeper into recession with a continuously weakening Rand. The local currency briefly gained after Ramaphosa’s speech before slipping back to trade 0.31 percent firmer against the dollar. Some analysts were underwhelmed by the stimulus plan and says the undercurrent of the speech was more political than pure economics. Ramaphosa said the infrastructure fund would attract finances from development institutions and banks, private lenders and private sector and ordinary investors. South Africa needs faster economic growth to reduce its 27 percent unemployment rate and alleviate poverty and inequality, which are stoking instability ahead of national elections next year The central bank cut its gross domestic product forecast for 2018 and said there was little leeway in monetary policy to boost the economy beyond the new growth figure while the outlook for inflation had deteriorated. A number of issues like land and mining ownership reforms set in motion by Ramaphosa have fended off investors, analysts say.
